Accunia Credit Management was established in 2008, originally as a multi-family office, but over time the firm has become increasingly focused on specialised areas within credit. “Credit is our niche, that is where we focus,” says David. Accunia began investing in CLO tranches as early as 2009, and later expanded into credit-linked notes, significant risk transfer transactions and asset-backed securities. The Accunia Alpha Credit Fund was launched in 2017, with Accunia as portfolio manager and GRIT as AIFM. Today, Accunia also manages a broad range of funds under its own AIFM authorisation, tailored to different risk profiles, including open-ended funds, listed funds with daily NAV and closed-end vehicles. 

According to David and Stefan, the common thread across Accunia’s strategies is the ability to harvest different forms of premium in the credit market. “Since the beginning, the focus has been on harvesting premium in the credit space. That can mean complexity premium, regulatory premium or liquidity premium,” David explains. Rather than focusing only on credit risk, Accunia looks for areas where investors are compensated for understanding structures that are less familiar, less liquid or created by regulatory changes. “For us, being that focused is an advantage. Clients know what they get with us. They get exposure to contractual cash flows, which is our bread and butter,” David adds.

So why invest in CLOs instead of traditional bonds? The starting point, according to David, is the spread differential. “At the time of the interview, a double-B rated CLO can offer a spread of around 500 basis points plus Euribor, whereas a double-B corporate bond might offer something closer to 200 basis points plus Euribor,” he says. The additional return reflects the same themes that run through Accunia’s approach: complexity, regulation and liquidity. “CLOs are less liquid and more complex than standard corporate bonds, and investors need to understand both the underlying loans and the structure itself,” Stefan adds.

David sees the CLO as a technology rather than a traditional asset class. “A typical CLO can be thought of as a lending vehicle of roughly €400 million. It finances itself through several tranches, from triple-A notes down to single-B notes, and with an equity tranche at the bottom of the structure. The proceeds are used to purchase senior secured loans to large European companies, often across 150 to 200 different borrowers and many sectors,” he says. “The CLO buys slices of loans, but conceptually it is similar to a bank lending to companies,” Stefan adds.

According to David, the growth of the CLO market is closely linked to changes in bank regulation after the financial crisis. As European banks became more constrained in lending to more leveraged companies, other capital providers stepped in. CLOs became an important source of financing for large private companies, particularly those owned by private equity sponsors. “It is important to remember that more than 90% of European companies are not public,” David points out. “Many of these companies still need financing, and a large share of that financing comes through the leveraged loan market and CLO structures.”

Unlike a bank, however, the liabilities of a CLO are locked in for many years. Investors in the debt tranches cannot simply demand their money back in a period of market stress. That makes the structure less vulnerable to the type of liquidity pressure that can affect banks. At the same time, the CLO manager is not forced to sell loans simply because market prices fall. “The only thing that can really destroy the CLO structure is defaults in the underlying loans,” David says. “An important distinction between traditional bonds and CLOs is that the manager of a CLO can be active, and that active management has historically been very important,” he adds.

For Accunia, analysing CLOs starts with the manager. In Europe, there are roughly 75 CLO managers, ranging from large global players to smaller and newer entrants. Accunia monitors data on more than 700 active European CLOs every month. Based on monthly reports, the team can assess credit quality, diversification, exposure to riskier loan categories and many other metrics. “We have around 15 metrics across these CLOs. Every month, we give each CLO a deal score and based on that information we can also rank managers,” David explains.

The quantitative work is only one part of the process. Accunia also meets CLO managers regularly, whether in Copenhagen, London or elsewhere, and challenges them on their portfolios, credit views and decision-making. The team looks at how managers behave through different market environments, how concentrated their portfolios are, how much exposure they have to weaker credits and whether they have the resources to follow the underlying companies closely. “There are clear differences between managers. Some take more risk, some are more diversified, and some are better at actively managing the portfolio,” David says.

Accunia also stress tests the structures it considers. Using tools such as Moody’s Analytics, the team models cash flows, default scenarios and the compensation received for taking risk. “When we look at a CLO, we ask whether there is a pickup and whether we are paid adequately for the risk,” David says. The process combines deal-level scoring, manager-level analysis and market pricing. “We are a nimble and agile investor. Even though our assets under management are approaching €2 billion, we can still look at opportunities and make decisions quickly,” he adds.

One of the reasons Accunia is comfortable with the asset class is the historical performance of leveraged loans and CLOs in Europe. Leveraged loans have existed for decades, and according to David, they have shown resilience through several periods of market stress, including the financial crisis, the euro crisis, Covid and the 2022 inflation shock. “If you take an asset class that has performed well over a long period and put it into a structure like a CLO, all else equal, you should be doing fine,” he says.

Active management is another important explanation. “During periods of stress, CLO managers can sell weaker loans, reduce exposures and reposition the portfolio before defaults occur,” David adds. Stefan also points to the structural protections built into CLOs. “In addition to active management, one reason defaults have historically been low is the cash diversion mechanism that protects the debt tranches,” he says. If certain tests are breached, cash that would otherwise flow to the equity tranche can instead be redirected to strengthen the collateral or pay down senior notes.

The priority of payments is central to the structure. Interest received from the loans is first used to pay expenses and then flows from the most senior debt tranches down through the capital structure. The equity tranche receives what is left but also bears the first losses. This is why Accunia offers different funds for different parts of the CLO capital structure. “Whether you choose a triple-A tranche, a double-B tranche or the equity tranche in a single CLO, the underlying pool is the same. The CLO gives investors a choice of how much risk they want to take,” Stefan explains.

Accunia Alpha Credit Fund, for which GRIT is the AIFM, is the oldest CLO fund managed by Accunia and invests mainly in European double-B and single-B rated CLO tranches. In the firm’s range of CLO strategies, it sits higher in risk than triple-A focused strategies but below CLO equity in risk. 

Beyond CLOs, Accunia has built its business around four credit pillars. The first is CLOs, which for many years have been the largest and most active part of the platform. The second is credit-linked notes, including exposure to iTraxx Main and Crossover. The third is regulatory capital, or significant risk transfer transactions, where investors take exposure to parts of a bank’s loan book. The fourth is asset-backed securities, which can include areas such as commercial real estate or data centres. “For the last three years, credit-linked notes have grown and become a larger part of our asset mix,” David says. “Over the next 12 to 18 months, we would like to be more active across all four asset types,” he adds.

As private credit has grown, CLO technology has increasingly been applied to new areas, including middle-market lending. David sees the development as natural but remains selective. “Traditional broadly syndicated loan CLOs have long data histories and more liquid underlying loans, whereas middle-market CLOs often involve bilateral or club-style loans to smaller companies. We like the CLO technology, and we like that it is being used in other places, but in some of these newer areas it is still early days,” he says. For Accunia, the tested nature of European leveraged loan CLOs remains an important advantage.

Still, David believes that broader capital market financing is a healthy development for Europe. He points to the long-running discussion around the Capital Markets Union and the need for Europe to become less dependent on bank lending. In that context, securitisation and structured credit can play a constructive role. “We saw during the financial crisis that overbanking can be a problem. Finding ways to mobilise capital outside the banking system is important for Europe’s competitiveness,” he says.

The current market environment is not without challenges. Geopolitical uncertainty has affected energy prices, which matters for European companies in sectors such as chemicals, building materials and industrials. Higher rates have also changed the picture for leveraged borrowers. “Companies that may previously have had interest coverage of four or five times are now closer to two or three times,” David says. Accunia expects defaults to rise from currently low levels but does not expect double-digit default rates in the near term.

According to David, for credit investors, the key question is not whether markets are perfectly calm, but whether companies can continue paying interest and refinancing their debt. The floating-rate nature of CLOs is also important. Accunia is not seeking to take large interest-rate views; instead, the focus is on credit risk, documentation, structure, stress testing and manager selection. “We do not believe in timing the market or making macro forecasts. We spend our time on the structure, the documentation and the credit work,” David says.

For David, one of the most important lessons in portfolio management is learning from mistakes and cutting losses when necessary. “At some point, you need to cut losses instead of spending resources unproductively,” he says. Small problem positions can consume too much time and attention if the process is not disciplined. That is why Accunia emphasises consistency, documentation and repeatability. “Having a clear and strict process is important. We need to act as a fiduciary and make the best decisions for our clients in a way that can be replicated internally,” David explains.

The partnership with GRIT fits into that mindset. Accunia values reliability, responsiveness and proactivity in its fund management partnerships. “Timely and reliable partnership is what makes the partnership with GRIT great,” Stefan says. “For a specialised manager focused on investment opportunities, being able to rely on the fund structure and operational side allows more attention to be directed toward investment work and client relationships,” he adds.

When David is not analysing CLOs, credit documents or manager data, he enjoys spending time with family and friends, going to FC Copenhagen matches, playing board games and barbecuing. “I have my own smoker, and I smoke a lot of meat, ribs and pulled pork during the summer. I have not mastered the brisket yet, so that may be the plan for 2027,” he says, laughing. The long cooking time also gives him a chance to read. “If you are looking, you are not cooking. You should just leave the smoker alone,” he jokes.

Stefan, meanwhile, spends much of his free time on tennis, snooker and travelling. “My children have grown up, so I have more free time now,” he says. His destinations, however, are often familiar ones: Finland and the Balkans. The contrast between David’s smoker and Stefan’s snooker table says something about the personalities behind the investment process: focused, analytical and disciplined, but also practical and grounded.

Looking ahead, Accunia expects to continue developing across its four credit pillars while maintaining the same disciplined approach that has guided the firm since its early years. The team believes that structured credit remains attractive when investors understand the underlying assets, the manager, the documentation and the compensation for risk. “A perfect CLO is one where the collateral is clean, the manager is someone we trust, and we are paid adequately for the risk,” David summarises.

This is marketing communication produced by GRIT Fund Management Company Ltd. The information given herein is not sufficient to make an investment decision. Read the prospectus and the key information document (KID) of the fund before making any final investment decisions. The value of an investment may rise or fall, and investors may lose part or all of the capital invested.