Historically, pricing a CLO deal has proven more straightforward when the loan market is robust and stable. As illustrated in the table below, approximately 75% of US CLO deals were priced when the Morningstar LSTA US B-BB Ratings Loan Index's bid price was 97 or above, with around 61% of deals priced at an index bid price of 98 or higher.
The table in this article displays a list of the top 30 largest global CLO managers, ranked by their global CLO assets under management (AUM) in USD billion as of September 30, 2023. Eight managers preside over upwards of $30 billion in global CLO assets. Four amongst the 30 managers ascend to the top 30 list, absent a European CLO platform. In terms of EU CLO AUM as a percentage of global CLO AUM, Investcorp commands the highest percentage at 44%, followed sequentially by CVC, Redding Ridge, HPS, Invesco, KKR, PGIM, Barings and Blackstone.
Notably, Redding Ridge, Hayfin Capital, Partners Group, Oaktree Capital, Invesco, Sound Point Capital, Napier Park and Permira Debt Managers all exhibit favourable reinvestment period profiles.
Below is a table detailing the top 30 EU CLO Managers, along with their EU CLO Assets Under Management (AUM) — represented in billions of Euros (€ BN) — as of 30th September 2023, and the ranking changes within the latest quarter.
Coincidentally, based on US BSL CLOs from 2012-2022, 2024 underlying collateral maturities experienced a decline of 71%, attributable to the redemption of CLOs, as well as refinancing and extension activities.
The table in this article shows the US BSL CLO asset maturity wall as well as asset notional amounts in CLO deals, segmented by different current WAL test cushions.
The table in this article shows the US MM CLO asset maturity wall as well as asset notional amounts in CLO deals, segmented by different current WAL test cushions.
It is encouraging to observe the year-to-date (YTD) upward trend in the reported collateral spreads for MM CLOs, based on...
The recent pricing of a 5-year reinvestment period deal – OHA Credit Funding 16 CLO – heralds a new tight BB level (SOFR + 675DM) since late 2015, when Madison Park Funding XVIII’s BB tranche was priced at 635DM (based on LIBOR), adjusting for market conditions.
When looking at the alpha performance in each category, it's clear that larger EU CLO managers are not doing worse than their smaller peers. In fact, they performed slightly better.
The chart below depicts the average alpha metric trends for deals with horizontal slice risk retention (manager's retention) and deals with vertical strip risk retention (third-party majority equity). Interestingly, deals with vertical strip risk retention consistently outperformed their counterparts. However, more recently, their median performance metrics have shown convergence. As of the latest reading on September 6, 2023, the median deal with horizontal slice risk retention slightly outperformed the median deal with vertical strip risk retention.
The table in this article displays the relative ranking of each EU CLO manager, determined by their quarterly average total alpha metrics. For instance, a manager with a score of 81% (for 3Q 2023) implies that their total return alpha is in the 81st percentile. In other words, the manager's annualised total return alpha metric (since inception) exceeds that of 81% of its peers.
The table in this article illustrates the relative ranking of each EU CLO manager based on their quarterly average MV alpha metrics. For instance, a manager with a score of 82% (for 3Q2023) indicates that its MV return alpha is positioned at the 82nd percentile. In other words, the manager's MV return alpha metric surpasses that of 82% of its peers.
Estimating long-term annual default rates and an average recovery rate is an intricate process. At CLO Research, we employ the loan index to aid in estimating the annual credit loss rate inputs required for CLO cashflow modelling. This credit loss rate incorporates factors such as prepayment, trading losses, and reinvestment.
Investing in discounted BB-rated CLO tranches can yield significant rewards in the following scenarios:
