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 model allows users to select from a defined pool of deals, including those managed by managers with good historical performance based on MVOC or adjusted discounted spread metrics. For new issues, users may wish to use recent deals managed by their preferred managers as proxies.
For senior CLO tranche investors, managing overlap risk is likely to be an important consideration and a key area of focus.
Away from overlap optimisation, EU CLO BB and single-B tranches have generated impressive realised IRRs based on samples of fully repaid tranches. While the impairment risk of EU CLO single-B tranches is currently a much-discussed topic, their overall realised IRRs are expected to remain attractive.
On the other hand, the impairment rate for US CLO BB tranches from the 2018 vintage has continued to edge higher, with the latest figure approaching 20%.
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.
