RBC Capital Markets hired Allen Fu to run collateralized debt obligation trading, a new business for the bank, according to two people with knowledge of the hire.
Fu joins from Citigroup Inc. where he traded CDOs, backed by speculative-grade loans and bonds, said the people, who asked not to be identified because the hire hasn’t been announced publicly. Fu, who will be based in New York, will report to Mike Meyer, global head of credit at the investment-banking arm of Royal Bank of Canada, the people said.
RBC is setting up a CLO trading business as the market for funds backed by leveraged loans more than doubled since 2011, according to data compiled by Bloomberg. The bank has been building its credit business and has climbed to the 10th most-active underwriter of leveraged loans in the U.S. this year, from 15th in 2010, Bloomberg data show.
Sanam Heidary, an RBC spokeswoman, and Scott Helfman, a Citigroup spokesman, declined to comment. Fu declined to comment.
There have been $31.5 billion of CLOs backed by widely syndicated loans arranged this year up from $11.7 billion in 2011, Bloomberg data show. At the height of the market in 2007, $91.1 billion of the funds were sold, according to Morgan Stanley.
CLOs are a type of collateralized debt obligation that pool high-yield, high-risk loans and slice them into securities of varying risk and return.
RBC will look to trade across the CLO capital structure, from the riskiest portion, or so-called equity piece, to the highest-rated slice, the AAA debt, the people said.
RBC’s is growing its credit business during the last two years as loan issuance increased 48 percent for the same time period in 2010, Bloomberg data show. CLOs could help drive demand for new loans, which fund leveraged buyouts and acquisitions.
RBC hired Sean Peters from Citigroup last year to build out its credit trading group as it combined its new-issue and secondary loan sales teams. It brought on Ryan Atkinson as head of distressed in January as it also seeks to expand its offerings in that market.
There have been $412.9 billion of leveraged loans, those rated below BBB- by Standard & Poor’s and less than Baa3 at Moody’s Investors Service, raised this year, Bloomberg data show.