Golub's Private Credit CLO Offers Insurers a Rare Duration Play

In an era of persistent inflation and aggressive central bank rate hikes, insurers and long-term institutional investors face a dual challenge: securing assets that match their liability durations while generating risk-adjusted returns. Golub Capital's private credit collateralized loan obligations (CLOs) have emerged as a compelling solution, offering a rare combination of extended duration and resilient performance in rising-rate environments. By structuring CLOs with unusually long non-call periods and reinvestment windows, Golub has positioned itself to meet the unique needs of insurers while navigating macroeconomic headwinds.

Duration Extension: A Strategic Fit for Insurers

Golub's recent CLO innovations underscore its focus on duration alignment. In 2025, the firm priced a $427 million CLO with an eight-year non-call period and a 10-year replacement window for repaid loans-far exceeding the industry norms of two and five years, respectively, according to Bloomberg Law. This structure locks in investor capital for extended periods, providing insurers with stable, long-dated assets to hedge against interest rate volatility. Such duration extension is particularly valuable as insurers grapple with the rising cost of short-term liabilities and the need to avoid refinancing risks in a tightening credit market.

The firm's broader CLO strategy has also emphasized maturity ladder adjustments. For instance, Golub combined four CLOs into a $1.7 billion reset in November 2024, extending its debt maturity profile and reducing borrowing costs, as reported by BNN Bloomberg. These moves reflect a proactive approach to managing refinancing risks while maintaining flexibility to capitalize on new credit opportunities.

Risk-Adjusted Returns: Resilience Amid Rate Hikes

Golub's private credit CLOs have demonstrated robust risk-adjusted returns even as interest rates climbed. The Golub Capital Private Credit Fund (GCRED) reported an 11.4% annualized inception-to-date net return for Class I shares as of December 2024, alongside a 9.6% annualized net distribution rate, according to the fund's 8-K filing. These figures highlight the fund's ability to generate income and capital appreciation despite macroeconomic pressures.

The fund's success stems from its focus on U.S. middle-market loans, which have shown remarkable resilience. As of Q2 2025, private middle-market companies under Golub's portfolio reported continued earnings and revenue growth, even amid tariff uncertainties and tax policy shifts, according to Golub's middle-market report. This stability is reinforced by Golub's disciplined underwriting: its portfolio includes a high proportion of loans rated in the lowest risk categories, with no new payment defaults in recent quarters, the filing noted.

Third-party validations further underscore the fund's credit quality. Fitch Ratings and KBRA have affirmed the ratings of Golub's CLO notes, citing strong credit enhancement features and timely interest payments. These endorsements reflect confidence in Golub's ability to manage default risks and maintain performance under stress scenarios.

Market Resilience: Middle-Market Strength in a Tightening Cycle

Golub's CLOs are anchored by the durability of the middle-market sector. The firm's proprietary data reveals that U.S. middle-market companies posted 16% year-over-year earnings growth in Q4 2023, according to Golub's Q4 2023 report. This resilience is critical in a rising-rate environment, where weaker borrowers in larger markets often face liquidity strains. By targeting middle-market firms with strong cash flows and sponsor support, Golub minimizes exposure to credit stress while capturing yield premiums.

Moreover, Golub's active portfolio management has allowed it to adapt to shifting conditions. For example, Global Capital reported that the firm executed the year's tightest middle-market CLO in September 2024, priced at $701.5 million, reflecting its ability to access capital markets despite tightening spreads. Such agility ensures that Golub can maintain attractive risk-return profiles even as investor demand for private credit intensifies.

Conclusion: A Strategic Opportunity for Insurers

Golub's private credit CLOs represent a rare alignment of duration extension and risk-adjusted return potential. By structuring long-dated instruments tailored to insurers' liability profiles and leveraging the resilience of middle-market loans, the firm has created a compelling alternative to traditional fixed-income assets. As interest rates remain elevated, Golub's ability to balance credit quality with yield generation positions its CLOs as a strategic tool for insurers seeking to optimize their portfolios in a challenging macroeconomic landscape.