(Bloomberg) -- Michael Hintze’s hedge fund is mulling a green collateralized loan obligation in Europe as it expands its slate of socially responsible investments.
In a letter to investors seen by Bloomberg, Hintze said CQS is investigating a European CLO aligned with environmental, social and governance criteria. About 60% of CQS’s $21.6 billion of assets under management are already so-called Article 8 mandates, which promote ESG investments, the letter said.
A representative for the firm declined to comment when contacted by Bloomberg.
CLOs appeal to investors because their floating rates keep pace with climbing borrowing costs as central banks around the world move to tackle inflation by tightening policy. The asset class offers “some of the highest, most attractive yields” available in alternative credit, according to Hintze’s annual client letter.
Hintze took a beating in 2020 as investors fled riskier assets amid the pandemic, causing a meltdown in his structured credit bets. His firm offloaded its lowest-rated tranches of European CLOs at a deep discount to raise cash during the rout. The flagship Directional Opportunities fund made 21.4% last year, paring some of the losses.
CQS has had five CLOs in Europe since the platform initially launched in 2006. One of its active deals, Grosvenor Place CLO 2015-1, was last reset in 2018 after its issue in 2015, according to data compiled by Bloomberg.
The credit-focused firm launched its first CLO in the U.S. last year and plans to issue more over the next three years.
Read More: CQS Said to Sell European CLOs at 80% Discount in Market Turmoil
©2022 Bloomberg L.P.