A major consequence of regulatory reform since the credit crisis has been the reduction of future demand for leveraged loans. As one example, risk retention rules have dramatically impacted the formation of new CLOs. These securitized vehicles currently comprise roughly 60% of the broader US loan market.

Banks, of course, have seen their capacity curtailed as well. Just how much demand has been removed from the bank system is hard to quantify. Large cap issuers are working to structure loans with sufficient amortization and lower leverage to still appeal to regulated entities. But many transactions just won’t fit leveraged lending guidance.

Metrics on diminished CLO capacity are easier to come by. JP Morgan recently issued a report that examined loan securitization vehicles by reinvestment period. It found that about $320 billion are coming out of their reinvestment period after this year, with the balance ($122 billion) exiting by the end of 2016.

As we show in our Chart of the Week, the bulk of CLOs that will no longer be able to reinvest in loans comes in the 2017-2019 time frame. This corresponds with the class of 2012-2014 vehicles than came on line during the peak of CLO issuance before risk retention rules were adopted. In fact, the 2014 vintage accounts for 30% of all outstanding CLOs.