CLO Research

In the ever-evolving landscape of collateralized loan obligations (CLOs), staying informed with the most current insights and analyses is crucial...

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.

According to CLO Research’s independent analysis, RRAM has delivered consistently robust results from both equity and debt perspectives. Here’s a set of interview questions from CLO Research, accompanied by responses from Bhavin Patel, Chief Investment Officer of Redding Ridge Europe.

As of February 14, 2025, the latest arbitrage metric for US CLOs was recorded at around 220 bps, an improvement from 212 bps at the beginning of the year.

While asset spreads have tightened, the WACC has also become more competitive.

The table presented in this premium article showcases the trends by displaying the average annual prepayment rates for the first, second, and third years for each manager. These rates are calculated from seasoned deals whose reinvestment periods concluded before April 2024.

Several EU CLO managers have performed notably well in terms of MVOC, including Redding Ridge Asset Management, Partners Group, Sound Point Capital Management, LP, Neuberger Berman, Bridgepoint Credit, and Canyon Capital.

A sample of 1,481 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool...

OCP CLO 2025-40 recently priced its BB tranche at 440 bps and its AAA tranche at 114 bps, resulting in...

The recent pricing of Sound Point Euro CLO 14 has established a new benchmark for the AAA-BB pricing differential. In...

Notably, the EU CLO equity NAV metrics outperform those of their US BSL CLO counterparts across all vintages, despite the latter's significantly more diversified underlying portfolios.

Please refer to the table below for a complete list of 70 EU CLO managers and their EU CLO collateral AUM trends since 31 December 2017. As of 31 December 2024, the total EU CLO AUM stands at approximately EUR 245 billion, reflecting a CAGR of about 20% over this period. The second table provides a breakdown of each manager’s AUM, organized by reinvestment period (RP) as of 31 December 2024. The third table highlights the ten fastest-growing managers by notional AUM annually since December 2017. The fourth table shows the average annual AUM growth in notional terms for each manager since the closing of their first deal.

In conclusion, while the allure of high returns from CLO equity investments is enticing, the complexities and inherent risks involved demand a sophisticated and carefully considered investment strategy. A thorough understanding of both the favourable and unfavourable conditions impacting these investments is vital for any investor considering this asset class.

This article examines the key factors behind 1.0 US CLO equity outperformance, offering insights that remain highly relevant in today’s market. It also suggests that 2.0 US CLO equity performance is not directly comparable to 1.0 CLO equity, as a few key ingredients appear to be missing.