Infrastructure CLO Market Turns Corner Amid Data Center Surge; Investors Drawn to Incremental Spread, Stable Returns

2026 is poised to become a banner year for the infrastructure CLO market, with sources indicating that the asset class is set for a year of record issuance. Already a succession of new entrants is looking to set up new infrastructure CLO platforms this year and firms are innovating with structures in order to attract fresh investor capital.

Infrastructure debt has a track record of lower defaults and higher recovery rates than the leveraged loan or private credit markets in recent years. Demand for infrastructure CLO debt is supported by wider liability pricing in the tranche market, allowing investors to pick up incremental yield versus comparably rated corporate CLO investments. On the supply side, capital-intensive projects including AI data center development have increased the need for innovative financing structures.

Infrastructure CLOs are undergoing a major shift, with Eagle Point, Rivage and Blackstone in the process of bringing infrastructure CLOs to the market, according to Octus reporting. Eagle Point’s intended forthcoming transaction is especially noteworthy as it is backed by private credit infrastructure loans, which would be an industry first. Last year Barings became the latest and largest asset manager to enter the sector, with its inaugural deal pricing on Dec. 23, 2025.

Bo Trant, client portfolio manager on Barings’ CLO team, told Octus that financing demand for infrastructure projects has expanded at a breakneck pace.

“Particularly in North America, it’s starting to get to a point where the traditional sources of financing are struggling to maintain the need to feed the needs of those borrowers,” Trant said. “So the ability for asset managers like us to bring institutional appetite into the market is being well received and will continue to be well received for the foreseeable future.”

As the market expands, the types of loans included in infrastructure CLOs have also increased, according to an industry lawyer. Typical mainstay sectors include power generation, digital infrastructure and utilities, but categorizations are loosening, allowing for greater diversification in the asset pool.

The sense that infrastructure CLO collateral has diversified in nature has drawn criticism among some traditional CLO investors. One critic told Octus that these deals should not be classified as infrastructure bonds because they hold corporate loans rather than, as an example, direct revenue bonds to municipalities.

“Some of the infrastructure CLOs that are in the market are not actual infrastructure bonds if you think about it like a toll road bond or something like that,” said an executive at an asset management firm that buys CLO tranches. “The deals are CLOs because they’re still buying leveraged loans to corporations but they happen to be corporate loans that focus on infrastructure building or management, so [infrastructure CLO is] a little bit of a misnomer.”

In addition to demand for infrastructure CLOs increasing, demand for data centers is rising disproportionately quickly, with data center ABS becoming an extremely popular asset class for structured credit investors. Janus Henderson’s global head of structured products, John Kerschner, said that their future in securitized markets is unclear considering their rapid rise.

“Data centers really came to the fore [of securitized markets] last year, and this year we expect double the issuance,” said Kerschner. “The growth is huge, but in the grand scheme of securitized markets it’s a drop in the bucket and it wasn’t until last year that it got in front of investors. [AI funding] is much more concerning for investment-grade markets than securitized markets, as over the next few years securitized markets will likely digest $50-$60 billion per year in data centers. The big concern is obsolescence approaching quickly. What’s it going to look like in five, 10, 30 years when two years ago the public didn’t even know what an LLM is?”

Despite the sharp increase in demand for data center funding, they are not the only type of collateral that infrastructure CLOs take into account. Barings’ debut transaction included collateral from only one data center; the rest included assets such as toll roads and other types of infrastructure.

So far, the two main managers behind infrastructure CLOs have been DWS and Starwood, via the RIN and STWD SIF programmes. In 2025, the firms priced two new issues each, while DWS priced several resets. Both firms declined to comment on the current state of the infrastructure CLO market.

Barings priced its first infrastructure CLO on Dec. 23. The $506.77 million transaction, named Barings Infrastructure CLO 2025-1, has a five-year reinvestment period ending in January 2031 and a two-year noncall period ending in January 2028. The $320 million triple-A offered a hefty spread pickup compared with BSL CLOs at the time.

Barings’ debut triple-A tranche priced at SOFR+140 bps, 15 bps wide of the 125-bps 10-day average for triple-A tranches. Additionally, the transaction’s triple-B tranche priced at SOFR+290 bps, 14.7 bps wide of the 10-day average, which sat at SOFR+275.3 bps.

MUFG and Morgan Stanley shared arranger duties for the transaction, and since Barings priced it, Octus has become aware of three more infrastructure CLOs making their way to the broader market, from Eagle Point, Rivage and Blackstone.

Adrienne Butler, head of global CLOs for Barings, described the transaction as a natural marriage of Barings’ infrastructure and CLO desks, and said investors were eager to understand the growing platform.

“Our infrastructure team has been investing for 30 years, so bringing both of these asset classes together was kind of natural,” said Butler. “When we went to the market and shared that with our investor base, it really resonated with them. They enjoyed having that conversation with us to understand what our growth strategies were, and how we were lending to one of our most established and growing platforms.”

Several investors from around the world participated in the final transaction. Butler said that the first movers involved in the transaction show a specialized commitment, but that Barings’ infrastructure CLO program garnered a wide variety of investors interested in potentially participating in future iterations of the shelf.

“First mover status for investing in these CLOs is probably a more specialized commitment to a structure and platform, but we had over 10 different investors in the CLO globally, across North America, the Middle East, Europe, and Canada. Most of them were historical CLO investors who appreciated and understood the growth in the infrastructure market and wanted to find a way to participate in that growth through a mechanism that worked for them,” Butler said.

Barings’ senior director of global infrastructure debt, Stephen Coscia, added that the asset class is attractive to CLO investors for a variety of reasons. “This is people being drawn to infrastructure CLOs because infrastructure as an asset class does tend to have lower defaults, higher recoveries, and generally a higher credit quality than corporate credit,” Coscia said. “And on the debt tranches, they are able to get a premium to BSL CLOs.”

According to an October 2024 report from Macquarie, infrastructure debt has a default rate of 2%, whereas direct lending defaults at 2.1% and leveraged loans default at 2.4%, offering a less risky pool of collateral for the CLO market.

“CLO technology is the best way to give a differentiated product to an institutional audience in a kind of structure that they understand,” said Barings’ Trant. “CLOs allow investors to pick different risk return levels so if they want exposure to infrastructure debt, then CLOs will give them a diversified exposure and let them choose from triple-A, the safest tranche, to CLO equity where you can get leveraged access to the underlying portfolio. This is a structure the market has grown acceptance with; it’s just the underlying assets are now going to be infrastructure debt.”

Additionally, Trant said that the infrastructure bond market continues to grow substantially, meaning that its capital needs are expanding. As a result, Trant said, the infrastructure market will need new ways to access debt, whether through infrastructure CLOs, other debt vehicles or both.

“The market is still growing; there have been infrastructure CLOs around in different shapes and forms for a long time,” said Trant. “I would say maybe since 2017, 2018, ones that resemble the more traditional CLOs have started to pop up. We’re seeing more interest in that space and something other players are looking to lean into as one way to offer infrastructure debt.”