Risk retention will soon be a thing of the past in the US. So what happens to all the risk retention funds raised in the last couple of years?
The long saga of risk retention took an unexpected turn last month, as a Washington DC appeals court threw out risk retention rules for managers of open-market CLOs.
The unanimous 3-0 ruling on 9 February was a huge victory for loan industry lobby group the Loan Syndications and Trading Association (LSTA), which had pursued the SEC through the courts arguing that applying risk retention requirements to CLO managers was an example of executive overreach.
As a result, barring an (unlikely) appeal from the government, CLO risk retention will become a thing of the past on 2 April, having been in effect for a little over one year…
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