SCI: Pearl Diver Capital opens Dubai office to tap regional CLO demand
By Marina Torres
Matt Layton, partner and head of EMEA at Pearl Diver Capital, answers SCI's questions about its recent expansion into the Middle East with the opening of a new office in Dubai as part of the firm's efforts to grow their global CLO strategy
Q: Where did the decision to open an office in Dubai come from?
Matt: Opening an office in the The Gulf Cooperation Council (GCC) region is a natural progression for our firm. Since Pearl Diver Capital was established in 2008, we have built a successful franchise across Europe, the US and LATAM with offices in London and New York. For a number of years, we have witnessed increased investor appetite from GCC countries, and we would like to service those investors with a local team. This is just a natural progression to expand our global reach. It gives us a base not only across UAE and GCC countries, but also as a footprint to step into Asian geographies.
Q: What is the strategy for the new office? Are you looking at specific asset classes for the expansion?
Matt: Today we are a dedicated third-party CLO investment boutique, so we run a series of strategies that invest across the global CLO market, through equity, mezzanine and investment grade tranches. We are also flexible and invest through both the primary and secondary markets, depending on whichever produces the better risk adjusted returns.
We offer a range of structures, including liquid, private equity style drawdown and even a New York Stock Exchange listed 40 Act vehicle (Ticker: PDCC). We're effectively a one stop shop for anybody who wishes to invest in CLOs and similar asset classes.
Q: What does the investor appetite look like in the region now?
Matt: We speak with a broad range of investors including banks, insurers, asset managers, sovereigns and family offices, through countries spanning across the GCC. Each has their own nuances in terms of what they're looking to achieve in their investment portfolio but are attracted to CLOs because of the stability of cashflows and extremely low long term historical default rate.
In the last two to three years, we have seen increased appetite for CLOs as knowledge and understanding of the asset class has improved. This is really a natural progression, as investors initially look towards other credit opportunities and then progress to CLOs.
CLOs are a US$1.4trn global market and have maintained returns and low default rates since the first CLOs were issued almost 25 years ago. They have also performed extremely well through several market dislocations and generated strong income throughout which investors value greatly.
Q: How do you see the CLO market progress in the UAE/Middle East in the upcoming years?
Interest in CLOs is certainly on the rise. There is an increased demand for credit products and once investors begin to look at credit, public and private, the relative benefits of CLOs, in terms of superior yield with lower default rates, becomes clear. This has been historically tested for over 20 years.