EU Module (Historical Performance and Style)

If these deals are liquidated, UBS AM and Redding Ridge stand to earn incentive fees in the healthy current loan market.

On average, EU CLO managers have met the expectations of their equity investors. Overall, based on deals that have already been redeemed or are anticipated to be redeemed, EU CLOs have delivered good performance, with an average equity IRR of 12.4%. This success can be attributed to a combination of factors, including disciplined issuance spurred by risk retention requirements, resets of more seasoned deals such as those from 2014 and 2015, the resilience of the underlying loan performance, the expertise of the managers, favourable CLO liability costs, and attractively priced assets, among others.

This article explores some of the key arguments for investing in captive CLO equity, how it differs from third-party CLO equity investments, and why it can be particularly appealing from a CLO manager’s perspective.

Overall, based on 97 deals that have already been redeemed or are anticipated to be redeemed, EU CLOs have delivered good performance, with an average equity IRR of 12.5%. This success can be attributed to a combination of factors, including disciplined issuance spurred by risk retention requirements, resets of more seasoned deals such as those from 2014 and 2015, the resilience of the underlying loan performance, the expertise of the managers, favourable CLO liability costs, and attractively priced assets, among others.

This study examines a sample of 355 EU CLO deals that remain within their reinvestment periods. Notably, Blackstone, Redding Ridge, KKR, CVC, Partners Group, and Napier Park stood out...

Some of the successful and consistent managers include CSAM, KKR, and CVC.

The following EU CLO deals issued and priced their single-B tranches this year. These tranches were originally structured for delayed...

Drawing from a sample of 87 EU CLO deals that have either been redeemed or are expected to reach full redemption shortly, equity tranches from the 2020, 2022, and 2023 vintages have delivered notable final IRRs, underpinned by robust equity NAV metrics. As illustrated in the table, their average equity NAVs surpassed 100%, underscoring strong performance.

To calculate the total/MV/interest return alpha, we begin by determining the total/MV/interest investment return for each complete period, such as from a deal’s closing date to the most recent reporting date. This is achieved by compounding the portfolio’s monthly (or periodic) total/MV/interest return since the closing date. We then annualise the total/MV/interest portfolio return and compare it with the annualised return of the index. The difference represents the total/MV/interest return alpha, as illustrated here.

To calculate the total/MV/interest return alpha, we commence by ascertaining the total/MV/interest investment return for each entire period, such as from a deal’s closing date to the last reporting date. This is accomplished by compounding the portfolio’s monthly (or periodic) total/MV/interest return since the closing date. Subsequently, we annualise the total/MV/interest portfolio return and compare it to the annualised return of the index. The disparity represents the total/MV/interest return alpha depicted here.

This study examines a sample of 218 deals from 2015 to 2019, utilising the Morningstar European Euro-Denominated Loan Index as...

This study examines a sample of 218 deals from 2015 to 2019, utilising the Morningstar European Euro-Denominated Loan Index as...

This study examines a sample of 218 deals from 2015 to 2019, utilising the Morningstar European Euro-Denominated Loan Index as the benchmark loan index.

It appears that there is a clear shift in style. Spire recorded above-average interest alpha until September 2020 and below-average interest alpha since then.

This study examines a sample of 218 deals from 2015 to 2019, utilising the Morningstar European Euro-Denominated Loan Index as...