JPMorgan Warns Up to $150 Billion of Loans in CLOs Face AI Risk

[Parsad]

https://finance.yahoo.com/news/jpmorgan-warns-150-billion-loans-222139102.html

 

Cheers!

[John Hjorth]

I wonder : Where are those USD 40 - 150 billion CLOs laying around?

[Masterofnone]

6 hours ago, John Hjorth said:

I wonder : Where are those USD 40 - 150 billion CLOs laying around?

Well, turning to AI for an answer I got this:

 

In the CLO market, publicly traded companies typically face risk through two primary channels: as

asset managers who earn fees but must hold "skin in the game" (risk retention), or as direct investors in the tranches.

 

Top Asset Managers (Manager Risk)

These companies manage the loan portfolios. While they earn management fees, they are exposed to reputational risk and mandatory "risk retention" holdings (typically 5% of the CLO). 

• Blackstone (BX): One of the largest global CLO managers, with over $50 billion in assets under management (AUM) as of late 2025.
• Carlyle Group (CG): Frequently ranks as the #1 or #2 manager globally, overseeing approximately $50.8 billion in CLO assets.
• Apollo Global Management (APO): Manages roughly $34 billion in CLOs through its Redding Ridge platform and other subsidiaries.
• Ares Management (ARES): Significant exposure with over $33 billion in CLO AUM.
• KKR & Co. Inc. (KKR): Manages nearly $30 billion in CLO assets. 

 

Major Bank Arrangers & Holders (Balance Sheet Risk) 

Large banks act as "arrangers" (underwriters) and are also some of the largest holders of senior AAA tranches. 

• Bank of America (BAC): The leading arranger in 2025, underwriting over $72 billion in CLOs.
• JPMorgan Chase (JPM): A major holder and arranger ($59.9 billion in 2025). In February 2026, JPMorgan analysts warned that up to $150 billion of loans within CLOs face disruption from AI-related shifts.
• Citigroup (C): A top global arranger with $68.5 billion in 2025 volume.
• Wells Fargo (WFC): Leading arranger for Private Credit CLOs, which often carry higher yields but less liquidity than Broadly Syndicated Loan (BSL) CLOs. 

 

High-Yield Investment Vehicles (Equity Risk)

The following companies primarily invest in the "Equity Tranche"—the riskiest part of the CLO that takes the first loss if defaults occur. 

• Oxford Lane Capital Corp (OXLC): A closed-end fund (CEF) that focuses almost exclusively on the equity tranches of CLOs.
• Eagle Point Credit Co (ECC): Another publicly traded vehicle concentrated in high-risk CLO equity and junior debt tranches.
• Blue Owl Capital (OWL): Operates several software-focused Business Development Companies (BDCs) that faced elevated redemption requests in late 2025 due to credit concerns. 

[John Hjorth]

1 hour ago, Masterofnone said:

Well, turning to AI for an answer I got this:

 

In the CLO market, publicly traded companies typically face risk through two primary channels: as

asset managers who earn fees but must hold "skin in the game" (risk retention), or as direct investors in the tranches.

 

Top Asset Managers (Manager Risk)

These companies manage the loan portfolios. While they earn management fees, they are exposed to reputational risk and mandatory "risk retention" holdings (typically 5% of the CLO). 

• Blackstone (BX): One of the largest global CLO managers, with over $50 billion in assets under management (AUM) as of late 2025.
• Carlyle Group (CG): Frequently ranks as the #1 or #2 manager globally, overseeing approximately $50.8 billion in CLO assets.
• Apollo Global Management (APO): Manages roughly $34 billion in CLOs through its Redding Ridge platform and other subsidiaries.
• Ares Management (ARES): Significant exposure with over $33 billion in CLO AUM.
• KKR & Co. Inc. (KKR): Manages nearly $30 billion in CLO assets. 

 

Major Bank Arrangers & Holders (Balance Sheet Risk) 

Large banks act as "arrangers" (underwriters) and are also some of the largest holders of senior AAA tranches. 

• Bank of America (BAC): The leading arranger in 2025, underwriting over $72 billion in CLOs.
• JPMorgan Chase (JPM): A major holder and arranger ($59.9 billion in 2025). In February 2026, JPMorgan analysts warned that up to $150 billion of loans within CLOs face disruption from AI-related shifts.
• Citigroup (C): A top global arranger with $68.5 billion in 2025 volume.
• Wells Fargo (WFC): Leading arranger for Private Credit CLOs, which often carry higher yields but less liquidity than Broadly Syndicated Loan (BSL) CLOs. 

 

High-Yield Investment Vehicles (Equity Risk)

The following companies primarily invest in the "Equity Tranche"—the riskiest part of the CLO that takes the first loss if defaults occur. 

• Oxford Lane Capital Corp (OXLC): A closed-end fund (CEF) that focuses almost exclusively on the equity tranches of CLOs.
• Eagle Point Credit Co (ECC): Another publicly traded vehicle concentrated in high-risk CLO equity and junior debt tranches.
• Blue Owl Capital (OWL): Operates several software-focused Business Development Companies (BDCs) that faced elevated redemption requests in late 2025 due to credit concerns. 

 

@Masterofnone,

 

Thank you for your post above. Much appeciated, to further dive in. Re sceptical, [scrared?] : Me more sceptical, scared. than thrilied.

Edited February 28 by John Hjorth

[NotSoWise]

Interesting to read Semper Augustus 2025 letter on AI section (from page around 60), with subsections on:

1. return on equity from AI capex

2. SPVs/ off balance sheet deal in hyperscalers

3. circular reve (Nvidia/ MSFT)

4. debt

 

https://www.semperaugustus.com/clientletter

[Parsad]

The "swimming naked" revelations are slowly rearing their heads!  Cheers!

 

https://finance.yahoo.com/news/blackrock-26-billion-private-credit-195527199.html