One of the hottest fund finance trends is an alternative investment vehicle that has become increasingly popular. A close sibling of collateralized debt obligations (“CDOs”), collateralized fund obligations (“CFOs”) are a vehicle for securitizing portfolios of alternative or real assets, including interests in private equity funds, hedge funds, private credit funds, infrastructure and real estate debt and equity, and other similar investments (“Underlying Fund Interests”). In this Legal Update, we explain the history, structure, and variations of these alternative financing vehicles, so sponsors and investors can determine if a CFO transaction aligns with their business objectives.
What is a Collateralized Fund Obligation?
While CFOs can take various forms, they are essentially created when a bankruptcy-remote special purpose entity (“CFO Issuer”) acquires a diversified portfolio of Underlying Fund Interests.
Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.