CLO Research

This article details the track record of redeemed static deals.

Unlike 1.0 CLO equity, for a post-2012 CLO deal to deliver a decent equity IRR, the final NAV realisation plays a critical role.

The tables below show the YTD and MTD MVOC and Equity NAV change for US BSL CLO and EU CLO deals as of 28 Oct 2022.

Collateral weighted average price (WAP*) is quite useful for a quick snapshot of collateral credit risks.

CLO equity and lower mezz tranches are more exposed to idiosyncratic risk. Generally speaking, deals with a bigger below 80 price bucket would tend to see their equity and lower mezz tranches get hit harder from a valuation standpoint.

The following tables show the below 70 and 60 price buckets for US and EU CLOs by vintage based on asset prices...

The tables below show the MTD MVOC change for US BSL CLO and EU CLO deals as of 13 Oct 2022.

Managers can build par by buying a loan at a discount at say 85c and have it treated at par for the calculation of OC ratios. On the other hand, managers can also burn lots of par by trading out of more distressed credits.

Please see the table below for the list of managers' Q3 2022 MV return alpha and par build (annualized) metrics:

48.4% of a sample of 1431 US BSL CLO deals have a negative equity NAV and 100.0% of a sample of 456 EU CLO deals have a negative equity NAV.

This theoretical exercise of understanding the floor highlights the vast amount of credit support in the 2.0 EU CLO structure post-GFC.

Please see the table for the list of 50 largest global CLO managers and their CLO AUM breakdown by US and EU CLO AUM as of 30 Sep 2022.

Who are the ten largest CLO managers in the world?

The table above shows the relationship between managers’ median WARF and their average Q3 2022 total annualized return alpha.

US CLO managers are paid around 40bp per annum, but their return performance can vary significantly.