While leverage continues to drift higher in the market, it appears investors are happy to accept lower levels of premium on credit-based assets

Almost four years ago the US Securities and Exchange Commission and US Federal Reserve implemented capital reserve requirements such that collateralized loan obligation (CLO) sponsors would be required to invest capital in the CLOs they manage – a structural change designed to align the interests, and more importantly, the risk exposures, of sponsors with that of investors. The requirement was set in motion as part of a large swathe of regulatory changes implemented under Section 941 of the Dodd-Frank Act. However, in a somewhat surprising move, the US Court of Appeals for the District of Columbia relaxed this requirement on…