CLO Research

Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset...

The absence of CLO arbitrage has been garnering significant attention recently. This concept encompasses several facets, most notably the initial net interest margin of a CLO deal. However, in periods of loan market volatility, the importance of the initial net interest margin diminishes somewhat, as market participants redirect their focus towards the enticing potential rewards associated with the rise in equity NAV.

CLO deals are typically called during periods of strength in the loan market. For instance, approximately 85% of the more...

MVOC serves as a pivotal point-in-time indicator, shaping the pricing of CLO-rated tranches, while drawing the keen attention of primary and secondary market participants.

Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset...

The table below shows the relative rankings of the largest EU CLO managers based on their latest average total alpha metrics (as of May 5th, 2023). For example, a score of 78% indicates that a manager's total return alpha is in the 78th percentile, meaning their metric is greater than that of 78% of their peers. Check out the rankings to see how these large managers compare in terms of performance!

The table below displays the average exposure of US CLO managers to price buckets below $80 and $70, based on asset prices as of 5th May 2023. Notably, Whitebox, New Mountain, Oak Hill, Golub, AIG, and Sancus have some of the lowest exposure to the below $80 and $70 price buckets in their 2021 vintage deals.

Examining the exposure below the €80 and €70 price buckets provides valuable insights into the tail risk of the collateral pool. However, it is important to note that these figures may be influenced by trading activities, which can distort the results. For instance, CLO managers may have realized credit losses and lost par due to trading underperforming assets. Therefore, data on the change in portfolio par since inception has been included to provide additional context. Additionally, the last column shows the average % of fixed rate exposure by manager.

Below are tables presenting the MVOC (AAA-B) and EQ NAV of US BSL CLO deals by vintage, based on asset...

It is important to highlight the significant variation observed in the BB MVOC and equity NAV metrics across the 2022 vintage deals.

The pricing of CLO-rated tranches in both primary and secondary markets heavily relies on MVOC metrics, making the performance of the loan market a significant factor that impacts the trading of these tranches.

This article provides a comparative analysis of the investment strategies of three top-tier US CLO managers based on their total alpha performance from seasoned deals. The investment strategies are outlined in the latest Fitch Ratings’ CLO Asset Manager Handbook.

AAA CLO investors would undoubtedly favour witnessing higher prepayment rates during the post-reinvestment period.

"CLO equity investors would prefer to see lower prepayment rates, particularly during the first two years of the initial two-year period following the reinvestment period."

For a sample of EU CLO deals with reinvestment end dates between July 2018 and January 2022, the post-reinvestment end...