US CLOs: The Relationship Between Investment Performance And Underlying Collateral Liquidity
The graph below shows the investment alpha of 79 managers and the LPC weighted average depth (as of 29 April 2021) of their portfolios. LPC weighted average depth refers to the average number of pricing contributors weighted by the asset balance in the CLO portfolio. This measure is used here as a proxy for the collateral liquidity of each CLO portfolio.
Based on the graph below, it is perhaps hard to draw any conclusion as to whether running a less liquid portfolio would lead to investment outperformance or underperformance.
The graph below shows the average investment alpha of 79 managers and their WARF (average). WARF(average) refers to the average WARF reported since inception. Similar to the above, WARF does not seem to be driving investment performance.
Disclaimers
The information, research, data, research related opinions, observations and estimates contained in this document have been compiled or arrived at by CLO Research Group, based upon sources believed to be reliable and accurate, and in good faith, but in each case without further investigation. None of CLO Research Group or its service providers; authorised personnel, or their directors make any expressed or implied presentation or warranty, nor do any of such persons accept any responsibility or liability as to the accuracy, timeliness, completeness or correctness of such sources and the information, research, data, research related opinions, observations and estimates contained in this document. All information, research, data, research related opinions, observations, and estimates in this document are in draft form as of the date of this document and remain subject to change and amendment without notice. Neither CLO Research Group nor any of their third-party providers shall be subject to any damages or liability for any errors, omissions, incompleteness or incorrectness of this document. This article is not and should not be construed as an offer, or a solicitation of an offer, to buy or sell securities and shall not be relied upon as a promise or representation regarding the historical or current position or performance of any of the deals or issues mentioned in it.
