From Art History to CIO: Meet the Leader of Clarion Capital Partners’ CLO Brain Trust

July 13 2023

On a spring day in May, we sat down with Robert Klein, President and Chief Investment Officer of Structured Credit at Clarion Capital Partners. We spoke with Robert about his origin story, his investment strategy, and team, and how they found a home with Clarion.

Tell us about Clarion Capital Partners and your role within the firm…

Clarion Capital Partners was founded in 2000, and currently manages nearly $2 billion1, with a legacy in middle market private equity. Clarion is a highly reputable manager among its peers. You may be familiar with some of the companies that have gone full cycle in the firm’s portfolio: IMAX entertainment, Hartmann luggage, and All-Clad cookware. In addition to the consumer and media and entertainment sectors, the firm invests across business, healthcare, and financial services, with a focus on technology-driven opportunities.

I joined the firm in 2018 as President and CIO of the firm’s Structured Credit business. For Clarion Capital Partners, private equity and private credit—particularly from the perspective of financing private companies—are complementary asset classes. We don’t have a direct lending business, but our expansion into structured credit was the logical next step in the evolution of the firm.

Today, I oversee a talented team at Clarion Capital Partners that invests across the most opportunistic segments within the Collateralized Loan Obligation market: CLO equity, CLO mezzanine, and CLO warehouse investments. Our team manages over $300 million across private funds, separate accounts, and an insurance dedicated fund, with a growing asset base. Our team has a long structured credit history and is considered a known player among CLO industry leaders, but has the ability to be more nimble and opportunistic as a boutique.

How did you go from studying history of art at Yale University and then law at Stanford to credit investing and CIO at Clarion Capital Partners?

It’s an interesting story. Much of my career has been in private equity—before transitioning into credit—so Clarion is a natural fit as a leading middle-market private equity boutique.

Let’s go back to the beginning.

I graduated from Yale.

Are you being modest?

I graduated from Yale summa cum laude in History of Art and was a member of Phi Beta Kappa.

How did you get from Art History to finance?

After Yale, I was accepted to Stanford Law School, but deferred my enrollment for two years to gain experience. During that time, I joined the Morgan Stanley investment banking training program in their mergers and acquisitions department. That was the beginning of my career in private equity and credit.

You then graduated from Stanford Law with Distinction. Did you ever become an attorney?

I was admitted to the California bar, but I’m not currently active. My legal background has been integral to my career, though I have never worked as a lawyer. While there are voluminous documents integral to our industry, legal documentation completion is left to others.

I once thought I would practice art law, but never did. Today, I’m lucky enough to serve on the Committee for Ancient Art at the Art Institute of Chicago, one of the oldest and largest art museums in the world.

What are your favorites among the museum’s collection?

Oh, there are too many! Among the museum’s many famous works is George Seurat’s A Sunday on La Grande Jatte, which inspired a Broadway musical. The painting serves as an apt metaphor for my work as a portfolio manager.

George Seurat’s A Sunday on La Grande Jatte

How so?

George Seurat revolutionized the art world with pointillism: innumerable points of color which fuse into a single image. This work, in a way, is analogous to the construction of a CLO equity portfolio, which is comprised of thousands of loan issuers bundled together into pools of securities. Investors seek a single picture or risk/return profile with cash flows and total returns. We strive to manage all the underlying loans and securities to create a financial masterwork. Except the markets, our canvas, are always changing. It’s hard to do.

Do you prove that portfolio management is both art and science?

Portfolio managers truly need multiple perspectives to navigate today’s markets.

What followed Morgan Stanley and Stanford Law School?

I joined First Boston, a storied, “bulge bracket” investment banking firm with a long history. When I was there, Fortune magazine called First Boston “the archetypal deal factory.”2 The firm completed $60 billion in M&A deals one year placing it second only to Goldman Sachs. Deal-making legends Bruce Wasserstein and Joe Perella led the firm, with transactions like Texaco’s takeover of Getty Oil.

First Boston became Credit Suisse First Boston. The firm made a major thrust into private equity by acquiring one of the great pioneers in middle market private equity, DLJ Merchant Banking, as part of its acquisition of Donaldson, Lufkin & Jenrette. So, I became a middle-market private equity specialist for quite a while. My prior experiences in middle market private equity dovetails with Clarion Capital’s specialty.

When did you move from middle market private equity to leveraged loans and CLOs?

The process was evolutionary.

After First Boston, I joined a business development company (BDC) called American Capital. BDCs are closed-end funds, generally publicly traded, that invest in smaller companies or companies in need of growth capital. Due to statutory requirements, BDCs must distribute most of their earnings and are popular with income-oriented investors.

At American Capital, we originated both middle-market buyouts and loans. I was the head of their New York office, the largest volume office of the many offices of American Capital across the U.S. and eventually in Europe. When American Capital securitized their middle market loan book, my portfolio would represent 70% of the loans in that CLO or securitization.

What did you learn there?

I started learning about securitization from the perspective of a portfolio manager selecting the specific loans for the securitization and answering questions from lenders and investment banks originating the structure. That was my first taste of CLOs.

What happened next?

Ares, the global credit, private equity, and real estate giant, acquired American Capital. I subsequently switched BDCs to a firm called Prospect Capital. Prospect was raising a lot of capital in the equity markets. As you get bigger and bigger as a BDC and as a middle market lender, it gets harder and harder to deploy capital without lowering your quality standards. As Prospect grew, we began looking strategically for other high yield instruments that would support the dividend of the BDC. We were originally going to buy a CLO manager and then provide capital for issuing CLOs. 

How did that play out?

At that time, as a public company, we would have needed to consolidate the debt of the CLOs onto the company's balance sheet. But BDCs have a leverage limit. So that was not going to work. As a result, we pivoted to investing in other managers’ CLOs. We began a “skunkworks” experiment buying majority equity stakes of new issue CLOs.


Skunkworks was the once-secret, now-famous Lockheed Martin research and development program that created the first jet fighter planes. Today, “skunkworks” refers to the best, agile, autonomous business R&D groups. The name comes from the L’il Abner comic strip. My art history background comes in handy.

So what happened in your CLO “skunkworks”?

What started as an experiment at Prospect Capital became one of their largest business segments. We were investing $50 million a month in new issue CLO equity. Coming out of the financial crisis, we were the largest buyer of new issue CLO equity in the marketplace. We formulated our quality approach to underwriting and built deep relationships with CLO managers across the U.S.

That experience crystallized our interest and knowledge of the CLO asset class. We developed relationships across the CLO industry which serve us to this day. When we call, our colleagues answer.

Where did this newfound knowledge take you?

Over time, we built relationships with the various and leading CLO platforms. One of the managers that I repeatedly invested with was a firm called CIFC, originally the Commercial Industrial Finance Corp. They were a top-five issuer of CLOs. We got to know each other very well. A key part of the CIFC strategic plan was to broaden their investment management mandate to grow AUM. They recruited me to do what I was already doing at the BDC. CIFC had dabbled in buying other managers’ CLO equity and mezzanine tranches. But they didn't really have the relationships with their competitors to buy into their CLOs. So, I was brought on board.

What happened then?

We launched a fund. CIFC was originally backed by a U.S. private equity firm, but shortly after I joined CIFC, the “for sale” sign went up. It's harder to raise capital when you’re for sale. Investors don't know who will be running the fund once the sale occurs.

How did that play out?

We put some of our structured products on pause. Instead, we raised assets for separately managed accounts. Sakura Moriuchi, now with Clarion Capital, worked with me then. She was essential to raising capital and serving investors for that strategy and structure. Our effort was fruitful for our clients. We were able to deploy capital through some very attractive times in 2016.

Eventually, the business, which was a publicly traded company at one time, got sold to an investment group financed by the Qatar royal family.

So one door was closing, as they say…

And another was opening. I decided that our team and strategy would be better served with a different profile of ownership. We went on a hunt. Where could our team and strategy -- proven at two different platforms -- best thrive?

Where did you look to go?

We looked at a number of different places, including some CLO managers and private equity firms. And Clarion Capital Partners was a terrific fit.

We wanted to join a successful team. Everyone wants to be part of a winning team, and from my observations, Clarion Capital Partners was a well-regarded and reputable middle market private equity firm. We shared much in common. Clarion felt familiar, since I had come from the middle market private equity and credit worlds.

What else appealed to you about Clarion Capital Partners?

Clarion also offered extensive internal abilities, infrastructure, and fundraising personnel rather than relying solely on third-party agents. Being in control of your own business growth across multiple dimensions was a feature I very much liked.

Culturally, we were a good fit. We had known each other casually over the years. They had talked to me before I joined CIFC but weren’t quite ready to start their credit journey. Then, the Clarion folks circled back and were ready to discuss how to move forward together.

How did you cement the relationship?

Clarion wanted to do a lot of due diligence. They wanted to understand every element of our strategy and the CLO markets. Marc Utay, Clarion’s Managing Partner, is very thoughtful, very analytical. He required a thorough vetting of our strategy. I spent several months running models and working through questions from Marc and his team.

What made Clarion different?

It quickly became apparent. They were focused not on how much money can we raise for this strategy, but on how much money can be made investing in this strategy.

They were focused on performance?

Exactly. At Clarion, we, the general partners, always have a lot of money invested alongside our limited partners, our investors. The extensive due diligence that they were doing on our CLO strategy and our team was about putting their personal money to work in this strategy.

What were the questions Clarion wanted answered?

At a high level... Is it a good strategy? Does the strategy provide distinctive sources of profits? Does the strategy offer the potential for repeatable high returns with limited downside risk? That goes to Clarion’s core philosophy of asymmetric risk award. CLO equity fits very well into that philosophy. Meaning, can you understand and corral or manage the downside risk and at the same time see significant layers of upside?

And that’s how the Clarion Capital Structured Credit Strategy started in 2018.

What was the “Ah-ha” moment for the team at Clarion Capital Partners?

The ah-ha moment was when we showed them how CLOs can actually do better when markets and the economy get worse.

Really? How’s that?

It’s a large topic. Let’s save that for our next discussion.

We look forward to it.

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1. As of March 31, 2023 valuation date.

2. Fortune, “Merger Fees that Bend the Mind” (January 1986).