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September 12, 2025
Cadwalader partners Nick Shiren and Matthew Worth were quoted in a recent Octus article exploring the growing demand for collateralized fund obligations (CFOs) in the wake of UK Solvency II reforms.
Historically, UK and European insurance firms have been limited in their ability to invest in CFOs by restrictive EU regulation. But following changes to the framework last year, several asset managers are now developing CFO structures designed to be capital efficient for U.K. insurers by meeting the “matching adjustment” criteria (requirements that were expanded to include assets with “predictable” rather than strictly “fixed” cash flows).
“The U.S. market is much deeper, as you’d expect,” Nick said. “But we’re seeing growth in demand from Europe year-on-year.” Matthew highlighted how sponsors are turning to CFOs as a source of liquidity: “From the GPs’ perspective, it’s key to have as much liquidity in the market and open your funds up to as big an investor base as possible. Private equity in particular is hungry for liquidity. The growth in CFOs is a manifestation of that.”
The article notes that while U.S. issuance has dominated in recent years, European sponsors are increasingly looking to enter the market as they seek the same benefits U.S. market participants do, driving a wave of CFO activity expected to continue through 2025.
Read the full article here.
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