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Understanding The Commonly Used CLO Deal Metrics and Their Limitations (Updated)

CLOs are primarily actively managed, and some commonly used deal metrics—point-in-time indicators—can occasionally be misleading. While these metrics can be useful, they should not be considered in isolation. Additionally, combining multiple metrics does not necessarily provide a clearer picture. For example, the weighted average price (WAP) of a CLO portfolio does not measure return performance over time and can be artificially inflated by trading activity. Though WAP is helpful for quick screening, it is not a reliable indicator of whether one manager has outperformed another. The same applies to annual equity distributions—a higher distribution does not necessarily indicate better manager performance. Therefore, combining these two metrics does not necessarily offer a more accurate assessment of a manager's performance.

EU CLO Managers (Performance)

Post-2013 EU CLO Equity IRRs by Vintage

Based on a sample of 83 EU CLO deals that have either already been redeemed or are expected to be fully redeemed soon, CLO equity tranches from the 2020, 2022, and 2023 vintages stood out, delivering impressive final IRRs supported by strong equity NAV metrics. As shown in the table above, their average equity NAVs exceeded 100%, highlighting robust performance.

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