(Bloomberg) -- Blackstone Inc. has agreed to acquire insurance firm American International Group Inc.’s $3.6 billion collateralized-loan obligation assets, according to people with knowledge of the matter. 

The purchase would make Blackstone the largest manager of CLOs in the $1.2 trillion global market that repackages leveraged loans into bonds. With the addition of AIG’s CLOs, Blackstone will have around $51 billion of such assets under management, just edging past Carlyle Group Inc.

The deal underscores the allure of the CLO management business: It has seen a boom in activity, as well as new entrants. Running contrary to a dip in overall transactions, CLO firms set a record for mergers and acquisitions in 2022, according to Citigroup Inc. On the flip side, some money managers struggled to find buyers for new issues in the second half of last year amid market volatility.

Blackstone and AIG declined to comment.

Carlyle, the holder of the mantle of the biggest CLO shop before the Blackstone-AIG transaction, itself bought CBAM Partners from Todd Boehly’s investment company to gain that title last year. 

Blackstone intends to hold the acquired CLO shop as a separate entity from its current platform, according to people familiar with the matter who aren’t authorized to speak publicly. Rather than simply buying the CLO assets as in some transactions, Blackstone will be gaining some staff as well, according to the people.

AIG had re-entered the CLO management business in 2018 with the purchase of Covenant Credit Partners, a small CLO manager led by industry veteran Marc Boatwright with $900 million of assets, and printed its first post-financial crisis CLO deal later that year.

The insurance firm, which required a government bailout during the global financial crisis more than a decade ago, had spun off its asset management arm in 2010 to Pacific Century Group. That business was renamed PineBridge Investments LLC. AIG had been investing in CLOs before the purchase of Covenant Credit. 

The transaction was previously reported by Creditflux.

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