CLO Research

While this piece is no longer as timely given the recent market rout, it still offers some noteworthy insights.

Weakness in the loan market has led to a broad-based widening of discount margins across the U.S. CLO capital structure. Lower mezzanine tranches have shown the greatest sensitivity to spread movements, reflecting their structurally leveraged exposure to underlying credit risk. In contrast, senior tranches (AAA/AA) and the single-A tranche exhibit a beta of less than 1.0 to loan market movements, indicating more moderate spread volatility in response to changes in collateral spreads.

As anticipated, weakness in the loan market results in a broad-based widening of discount margins across the CLO capital structure, with lower mezzanine tranches exhibiting the highest spread sensitivity — reflecting their structurally leveraged exposure to underlying credit risk. By contrast, senior tranches (AAA/AA) typically display a beta of less than 1.0 to loan market movements, indicating more muted spread volatility in response to changes in collateral spreads.

Allstate’s AIMCO CLO 12 performed particularly well in terms of both annual distributions and equity NAV.

Market Overview: Arbitrage and Performance Metrics As of 28 March 2025, the latest arbitrage metric for US BSL CLOs stood...

Some of the larger managers in the top quartile include OHA, BSP, Allstate, BlackRock, Golub, and Oaktree.

Seven EU CLO managers with smaller platforms performed strongly, with most of their deals ranking in the top quintile.

Notably, EU CLO equity NAV metrics surpass those of their US BSL CLO counterparts across all vintages except for 2022 and 2023 deals, despite the latter having considerably more diversified underlying portfolios. In particular, the equity NAV metrics of EU CLOs from the 2013–2014 and 2018 vintages are markedly higher than those of their US counterparts.

This article focuses on US BSL CLO deals that exited their reinvestment period (RP) in 2023, based on a sample of 386 deals. As shown in the table below, the median annualised prepayment rate was 20% in year 1, with a wide range—from 12% to 27%—based on the 25th and 75th percentiles. In year 2, the median annualised prepayment rate rose to 34%, while the interquartile range narrowed compared to year 1.

As these deals exited their reinvestment periods in 2022—a year marked by significant volatility—27 out of 67 managers sustained average single-digit annualised prepayment rates across their deals in the first year post-RP, as shown in the table below.

This analysis examines a sample of 966 deals currently within their reinvestment periods.

This study includes a sample of 439 seasoned deals that have concluded their reinvestment periods.

Cairn CLO X equity recently traded with a released cover price of EUR 46.3, equating to a primary equity IRR of 13.7%. Its strong performance was largely driven by a solid annual distribution of over 18% sustained over more than six years.

A more objective way to evaluate a manager’s capability is by examining the inception-to-date gross annualised collateral return of their deals, measured relative to the relevant loan indices and assessed on an unlevered basis. This provides a clearer measure of true alpha generation.

Here are the top 7 countries with the highest user activity over the past month.