After years of quietly building a name by investing its own capital, Eldridge now flips the script. The firm re-emerged with the integrated asset manager Eldridge Capital Management focused on raising third-party capital and is now considering getting back into the CLO business. 

Creditflux caught up with Nick Sandler, partner and co-president of Eldridge Capital Management and co-head of Diversified Credit, on why the asset manager is welcoming third-party investors and its interest in CLOs after selling the successful CBAM business just three years ago. 

Eldridge Industries is a well-known credit shop but its investment activities were largely funded by its own capital and managing the money of third-party investors was not a priority until now. Now the firm is branching out.  

“We’re a little bit different in the sense that we owned the wholesale life and annuity business first, and then transitioned into asset management,” Sandler said. “For some of our peers, they were in asset management first and then acquired a wholesale life and annuity business.” 

At the beginning, the firm’s various investment platforms were really meant to just find assets for the insurance company, Sandler said. The core investment team, which has been working together for almost 20 years, started with investing the Security Benefit’s balance sheet and had formed a number of investment platforms over the last decade. Security Benefit is one of Eldridge Industries’ wholly owned insurance companies. 

Eldridge Industries had partnered with the management teams and incentivized them, rather than paying other asset managers fees to find assets, Sandler said. In the process, the platforms became very successful and large enough to serve more than Eldridge Industries alone. 

“We recognized that our ability to originate was outpacing our ability to deploy retained earnings from our own balance sheets and to sell annuities,” Sandler told Creditflux. “So it seemed like a good time to consider third-party capital to invest alongside us.” 

At the end of last year, plans for Eldridge, a new insurance and asset management company wholly owned by Eldridge Industries, was announced. Eldridge, with USD 70bn in assets under management, now consists of asset management arm Eldridge Capital Management and insurance holding company Eldridge Wealth Solutions. The asset management arm is opening its doors to third-party investors, allowing them to invest capital alongside the insurer. 

The creation of Eldridge Capital Management combined a number of subsidiaries and allows the asset manager to focus on four investment strategies — diversified credit, GP solutions, real estate credit and sports and entertainment. The diversified credit platform includes private debt, asset-backed debt, opportunistic credit and structured credit opportunities and is led by Sandler and Jeffrey Forlizzi. 

However, the new integrated credit platform still has a key area of alternative credit that’s missing — CLOs. Eldridge, once a well-known name through its CLO manager CBAM Partners, made its exit in 2022. The firm sold CBAM Partners, which included a USD 15bn portfolio, to Carlyle. 

Despite that sale being just three years ago, the firm is already eyeing an entry back into the CLO business and has maintained its interest in the asset class. Earlier this year, Eldridge launched an active CLO ETF, the Eldridge AAA CLO UCITS ETF, to give European investors access to US dollar-denominated AAA-rated CLO bonds. The firm also manages Eldridge AAA CLO ETF and Eldridge BBB-B CLO ETF in the US. 

“While we exited CBAM very successfully, it’s not a stretch to think we wouldn’t want to be in that business again,” Sandler said. CLOs are a natural extension after the firm consolidated its businesses into one platform. There is a benefit to covering liquid credit names, and it is a good way to learn about a business because of the transparency of information, he said. 

Eldridge’s future growth will likely come equal parts from both the wealth solutions insurance as well as the asset management business, according to Sandler. The two arms of the business are complementary and really work hand in hand, he said. 

Combining the various investment platforms into one integrated asset manager has positioned the business for greater scale, Sandler said. As one entity, the manager gets better operational leverage and it will become easier to fundraise. 

“Eight months into this integration to Eldridge Capital Management, it’s been more synergistic than I could have hoped,” Sandler said. “It’s been very collaborative. Everyone’s rowing in the same direction.” 

With the asset manager’s combined credit team, the firm can pursue small and large private debt deals and can easily spot an opportunity for an asset-based lending solution if the original direct lending deal does not look favorable. Eldridge Capital Management not only found better origination opportunities but realized that on occasion, some teams may have ended up competing against each other if they did not have this level of communication and integration, he added. 

The firm’s credit capabilities in direct lending and asset-based lending were expanded further with bank partnerships. Last year, Eldridge selected Raymond James for a direct lending partnership, In late July, Eldridge and Fifth Third Bancorp struck a separate partnership focused on asset-based credit.