Sixth Street, the $60 billion alternatives manager, has launched a structured products business.
The firm has tapped Michael Dryden, who previously was global head of securitized products finance at Credit Suisse, to run the division. The group will focus on investments as well as origination across commercial and residential mortgages, renewables and energy finance, infrastructure debt, and other structured products, according to the company.
The expansion comes as Sixth Street has been increasing its insurance assets. Structured products offer the kind of risk-return profile that insurance companies like. These products are generally higher-rated assets that generate a little more yield than investment-grade corporate and government bonds. At the same time, they are far less risky than private equity and other alternatives.
As II reported in December 2021, Allianz Life and Sixth Street entered into a reinsurance agreement with Sixth Street’s portfolio company Talcott and partner Resolution Life. The deal was Sixth Street’s second big insurance deal last year. Earlier this year, Sixth Street announced a $25 billion reinsurance transaction between an affiliate of Talcott Resolution and Principal Financial Group. Alternatives firms have been going after insurance assets as a source of permanent capital.
The newly formed structured product division will “benefit from the knowledge, resources, and ALM (asset/liability management) capabilities” that Talcott Resolution offers, according to Sixth Street.
“Our thematic investing approach, deep underwriting expertise, and growing insurance capital base will all help drive the expansion of our presence in structured finance markets,” said Michael Muscolino, co-founder and partner, in a statement.
This move follows Blackstone’s November announcement of its structured finance group, which brought together the firm’s real estate debt strategies and other asset-backed financing investments. Blackstone expanded the firm’s structured finance business in part to handle the “increasing amounts of insurance capital” that Blackstone has been deploying.
“We look forward to utilizing the deep asset financing and structuring expertise that already exists across the firm to bring new offerings and capabilities to the companies and institutions with which Sixth Street partners,” added Dryden, in the statement.
Credit Suisse hired Dryden and other ex-Barclays executives in 2011. Before Credit Suisse, Dryden worked for Barclays Capital’s securitized products origination group.
