M&G Investments has formed a joint venture with Ontario Teachers’ Pension Plan to scale its European collateralised loan obligation (CLO) platform, Margay.

The $279.4bn (£210.1bn) defined benefit pension scheme has agreed to provide investment capacity of up to €200m (£171m) for equity investments in future M&G Margay CLO issuances, and to participate in the long-term economics of M&G’s European CLO business and support the platform’s continued growth.

Read more: JHI: BBB-rated CLOs are “a compelling option” for income-seeking investors

The joint venture aims to support “disciplined” platform growth, while delivering attractive risk-adjusted returns across market cycles, with capital to be deployed on an investment-by-investment basis, in accordance with the agreed investment framework.

M&G’s €27bn structured and private credit platform includes the Margay CLO programme.

Launched in 2023, M&G’s Margay CLO platform is led by head of private corporate credit, Fiona Hagdrup, and manages €1.6bn of CLO assets within a broader €10bn loan platform.

Hagdrup said the European CLO market continues to offer “compelling opportunities” for long-term investors, supported by a large and diverse pool of underlying senior loans.

Read more: European CLO issuance soars as direct lending cools

The CLO platform has also benefitted from capital from M&G’s Life business, which has invested more than £1bn in structured credit strategies over time.

“Our European platform is underpinned by disciplined credit selection and a long-term investment approach,” said James King, head of private and structured credit at M&G Investments. “Access to aligned long-term capital and the expertise of Ontario Teachers’ provides a strong foundation to scale the Margay programme over time, broadening our investor base and enabling us to deploy into opportunities as they arise, while continuing to deliver attractive risk-adjusted returns for our clients.”

“We believe the European CLO equity market is an attractive asset class that complements and diversifies our existing CLO equity programme and are pleased to expand our relationship with M&G,” added Michael Merkoulovitch, senior managing director, credit at Ontario Teachers’ Pension Plan. “With a strong alignment of interest and shared conviction in the opportunity, we look forward to working closely with M&G to grow Margay into one of Europe’s leading CLO platforms.”

Read more: Macquarie hits $1.6bn for CLO platform