While there are many unusual challenges straining the
global market under the weight of COVID-19, it seems some things
never change in moments of economic downturn. Blocker subsidiaries,
used in pooled investments like Collateralised Loan Obligations
(CLOs) or private funds, appear to always make a comeback in
stressed market circumstances. Especially during an economic crisis
or global pandemic, a manager's priority is to insulate their
portfolios from undue risk or additional costs that may arise due
to defaults on underlying investments. Being astute and savvy to
the advantages of blocker subsidiaries is helpful.
But what is the advantage of this simple structure, and why do
managers utilise blocker subsidiaries during challenging economic
conditions?
