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Insurers Are Urged to Put Aside Bad Memories and Embrace CLOs

  • Private debt, commercial mortgages offer opportunity: Voya
  • Tambascia says insurers need to ease pain of low rates

Insurers that might be hesitant to push into collateralized loan obligations after volatility during the financial crisis should reconsider, according to Voya Financial Inc.’s Kimberly Tambascia.

“Some companies have some bad muscle memory about CLOs because they were very volatile in 2008,” Tambascia, a client adviser at Voya Investment Management, said Friday in an interview at Bloomberg headquarters in New York. “But the fact of the matter is, having an asset that can drive spread, at least in the next few years in a relatively positive environment, is not such a bad place to be.”

The asset class has been drawing more interest. Sellers issued about $77.5 billion of CLOs this year, ahead of many estimates made late in 2016, according to data compiled by Bloomberg. That’s led asset managers to bolster operations managing CLOs. Principal Financial Group Inc.’s Post Advisory Group announced this week that it hired Bill Lemberg to push into the investments and Churchill Asset Management said last year that it closed its first CLO while under TIAA’s ownership.

CLOs, which bundle groups of loans including ones to back buyouts, can help insurers mitigate the pressure from low interest rates on bonds, which have crimped returns, Tambascia said.

“That’s pretty painful for them where they have rates-driven portfolios and so the result is it’s been very important for them to look for spread,” she said. “And spread, today, comes from asset classes like private credit, commercial mortgage loans and CLOs.”

Tambascia joined Voya’s $217 billion asset manager earlier this year from BlackRock Inc. to advise insurers. She’s also worked at American International Group Inc. and Morgan Stanley.

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