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Goldman Leads Bidding for $37 Billion Palmer Square, a CLO Powerhouse

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Goldman Leads Bidding for $37 Billion Palmer Square, a CLO Powerhouse

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A major player on Wall Street may be CLOsing in on CLOs.

Goldman Sachs is the lead bidder to buy Kansas-based Palmer Square Capital Management, a collateralized loan obligation powerhouse overseeing $37 billion, Bloomberg reported Tuesday. While a deal may not be reached, the talks illustrate Goldman's continued efforts to expand its footprint in the alternative credit markets, and an opportunity to beat alt heavyweights like Apollo at their own game.

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CLOs are pools of floating-rate loans, often below investment grade, that allow investors to potentially net higher-than-average returns in exchange for taking on greater default risk. It's no wonder they're appealing to investors (and alts managers): They can provide double-digit returns in today's 5% rate environment, and the structures are designed to limit risk, in part through diversification.

"In a market environment shaped by inflation uncertainty and evolving monetary policy, CLOs represent a distinct segment of the fixed income landscape," Fidelity portfolio managers wrote in a white paper earlier this year. " An analysis from VanEck also found that they've typically been able to weather market downturns better than high-yield and corporate bonds.


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