The collateralized loan obligation (CLO) market is on a tear. A confluence of factors — chief among them increased demand from a broader range of investors and impending regulation that could leave some CLO managers out of the game in the future — has set the stage for what could be a record year.

More than $50 billion of U.S. CLOs has been raised so far this year, compared with $82 billion for all of 2013, and analysts at the Royal Bank of Scotland (RBS) expect volume to top $55 billion by the end of the first half of 2014.

Revised bank forecasts range as high as $100 billion for the year — JPMorgan Chase & Co.’s prediction as of early May — which would top even the $97 billion market peak of 2006. And whereas not everyone is that bullish, it is now widely expected that 2014 will be the market’s biggest year since the financial crisis. “This pace might not be sustainable for the rest of 2014, but I do believe we’ll eclipse last year’s $82 billion,” says Ken Kroszner, head of CLO strategy at RBS in Stamford, Connecticut.

As with anything related to an investment vehicle that begins with the word “collateralized,” the reasons for this surge in volume are complicated. The market started the year off in a slump following the December 2013 publication of the final draft of the Volcker Rule, which contains regulations that prohibit, among other things, U.S. banks from investing in the debt of CLOs that own bonds. U.S. banks had been the largest buyer of CLO triple-A paper, the tranche that makes up 70 percent or so of the typical CLO.

CLOs pool high-yield corporate loans and slice them into securities of varying risk and return, with ratings typically ranging from triple-A down to double-B. The lowest-rated, highest-yielding tranche is known as the equity.

There was little clarity on the Volcker Rule in the first few months of this year as lobbyists for CLO players continued to push for an out — a grandfather clause, for example — that would allow existing CLOs to keep their bond buckets. Still, slowly but surely CLO underwriters and managers began to forge ahead with new Volcker-compliant, or bond-free, transactions.

And, as the months went on, they found healthy demand for triple-A paper from the broader CLO buyer base comprised of U.S. asset management companies, insurance companies and Asian (primarily Japanese) banks. This demand may be in part because of more attractive triple-A spreads. The average interest rate paid on triple-A paper was about 150 basis points over LIBOR in May, according to Wells Fargo & Co. That’s up from a spread as low as 110 basis points on triple-A tranches last year.