Recently, CLO Research published an overlap optimisation model covering almost all outstanding US BSL, middle-market and EU CLO deals. Users can use the model to optimise their CLO investment positions and minimise overlap risk.
The chart below presents the average realised IRRs of fully repaid EU CLO tranches across the AAA to BB rating spectrum. For further details and analysis, please consider subscribing to our premium content.
A sample of 1,998 US BSL CLOs and 370 US MM CLOs is used to provide the latest snapshot of various collateral quality metrics. Deals with a collateral pool factor of less than 80% are excluded from the analysis. The downloadable file includes tables covering CDO Weighted Average Spread (Reported), CDO % CCC+ or Below (Reported), CDO % Caa1 or Below (Reported), CDO Weighted Average Rating Factor (Reported), % of Assets with Spread > 4.50%, CDO Diversity Score (Reported), Default Balance (%), CDO % of Assets that are Fixed Rate, Senior Management Fee, Subordinated Management Fee, and BB, BBB, A and AA OC Ratios.
A sample of six top-tier CLO deals is used as a proxy for a new-issue CLO portfolio. The combined portfolios are rebalanced monthly, with loans priced below 92 excluded. On the liability side, the tightest DM in each week is identified, and the average of three such weekly observations is used as the monthly benchmark DM.
A sample of five top-tier CLO deals is used as a proxy for a new-issue CLO portfolio. The combined loan portfolios are rebalanced monthly, with loans priced below 92 excluded. On the liability side, the tightest DM in each week is identified, and the average of three such weekly observations is used as the monthly benchmark DM.
Across the 171 EU CLO deals that have been redeemed, the overall average IRR was 11.8%. The top quartile of deals achieved IRRs of at least 13.5%, while the bottom quartile recorded IRRs below 7.3%. Notably, the top 25% of deals within each vintage delivered minimum IRRs in the low teens, except for the 2017 and 2019 vintages, broadly in line with the returns typically marketed for CLO equity at primary issuance.
