According to CLO Research’s independent analysis, Golub Capital has delivered consistently strong results from an investment alpha perspective. Specifically, Golub Capital has achieved substantial outperformance relative to the Morningstar LSTA U.S. B/BB Ratings Loan Index on an unlevered basis over the past several years. Below is a list of interview questions from CLO Research, along with responses from Scott M. Morrison, Managing Director and Head of Broadly Syndicated Loans.

Have you ever wondered how CLO tranche ratings—AAA, AA, A, BBB, and BB—are derived from a portfolio of non-investment grade loans?

Drawing from a sample of 87 EU CLO deals that have either been redeemed or are expected to reach full redemption shortly, equity tranches from the 2020, 2022, and 2023 vintages have delivered notable final IRRs, underpinned by robust equity NAV metrics. As illustrated in the table, their average equity NAVs surpassed 100%, underscoring strong performance.

Although every CLO deal is unique, analysing historical prepayment rates during the post-RP period is valuable. It reveals manager tendencies, distinguishing those who consistently deliver lower prepayment rates from those with higher rates.

The table below lists the top MVOC quartile managers and their annualised sale volumes.

A sample of 1,511 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool...

Please refer to the table below for the ten largest CLO managers and their global CLO collateral AUM, broken down by US BSL, US MM, and EU CLO AUM as of September 30, 2024.

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This study examines a sample of 218 deals from the 2015 to 2019 vintages, utilising the Morningstar European Euro-Denominated Loan...

A sample of 1,546 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool...

A sample of 496 EU CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool factor below 60% are excluded. Market Value Over-Collateralization (MVOC), for instance, at the BB tranche level, is calculated by dividing the collateral market value (MV) by the sum of CLO liabilities (AAA to BB). MVOC is a crucial point-in-time metric for pricing CLO-rated tranches, closely monitored by primary and secondary market participants. If you’re curious to explore our premium insights or would like a personal walkthrough of the website via Zoom, feel free to reach out at info@clopremium.co.uk.

While each CLO deal is different, understanding the historical prepayment rates based on the original collateral balance during the post-RI period for each manager remains highly beneficial. Analyzing these rates offers insights into the tendencies of different managers, highlighting those who consistently achieve lower prepayment rates and those who tend to experience higher rates in the post-reinvestment phase. To illustrate these trends, the following table presents the average first-year, second-year, and third-year annualized prepayment rates for each manager, based on data from their seasoned deals that have passed their reinvestment end dates. These historical post-RI prepayment rates could be useful as cash flow modeling inputs for each manager.

Based on 558 post-2012 US CLO deals that have been redeemed or paid off so far, those from the 2014 and 2018 vintages performed the worst. However, the sample size for the 2018 vintage deals is still relatively small. Deals from the 2020 and 2022 vintages performed the best, with median deals registering IRRs of...

The following EU CLO deals issued and priced their single-B tranches this year. These were initially structured for delayed issuance...

YTD, 70 BSL CLO deals have been reported to have undergone resets. Among these, 15 deals from the 2022–2023 vintages have reduced their cost of funding by an average of 61 bps, while also extending their reinvestment periods by about 2.7 years on average. 

The table below shows the top-performing managers with the most 2013–2019 deals that are in the 90th percentile category. Notably, CSAM stood out as the most successful and consistent manager in delivering good returns to equity investors. Other successful managers include Oak Hill Advisors, KKR Financial Advisors, Goldentree Asset Management, Neuberger Berman, Generate Advisors, Fortress Investment Group, and Anchorage Capital Group.

At first glance, one might assume that managers with higher portfolio spreads tend to perform well during favorable market conditions but struggle during downturns. However, upon closer analysis of the average alpha performance within each category, this assumption is only partially valid and not universally applicable.

A sample of 313 seasoned deals (2016–2019 vintage deals) managed by 57 US CLO managers is included in this study. The benchmark loan index used is the Morningstar LSTA US B-BB Ratings Loan Index.

This study includes a sample of 93 more recent deals (closed in 2021 and Jan 2022) managed by 46 managers, using the Morningstar European B Ratings Loan Index as the benchmark loan index. The table below illustrates the relative standing of each EU CLO manager based on their latest average total alpha metrics (as of 26th June 2023) . A score of 98%, for instance, indicates that the manager’s total return alpha is at the 98th percentile, meaning their total return alpha metric exceeds that of 98% of their peers.

Overweight indicates that the manager’s average industry exposure exceeds the sample average exposure by 1 percentage point. Conversely, underweight means the manager’s average industry exposure is less than the industry average exposure by 1 percentage point.

Discover the main disparities between the seasoned US BSL and EU CLO equity tranches in relation to annual distributions and final equity net asset value (NAV) realisation values necessary to achieve a 12.0% internal rate of return (IRR) target. Explore the reasons why median EU CLO equity tranches have shown higher annual distributions compared to their US equivalents.

Securitisation can certainly play a crucial role in facilitating the mobilisation of institutional capital into infrastructure financing, especially for sustainable infrastructure and clean energy projects. Additionally, it can help banks recycle their balance sheets into originating new loans to finance such infrastructure initiatives. 

In the CLO market, the terms "CLO performance" or "resilience" can have varying definitions. It is essential to note that...

This study expands its analysis to include a sample of 90 more recent deals (closed in 2021) managed by 46...

The final IRR of a 2.0 CLO equity tranche very much depends on the final equity NAV realisation. There are 20 US CLO managers with at least one deal registering an IRR of over 15%.

A sample of 197 deals (2015–2019 vintage deals) managed by 38 managers is included in this study. The benchmark loan index used is the Morningstar European Euro Denominated Loan Index.

The top five US CLO managers for each WARF category are typically larger managers with a CLO AUM of $8 billion or more.

At CLO Research, we provide genuinely independent first-hand CLO research content that is highly relevant to the investing community. We can save you precious time and resources in assessing CLO managers through manager scoring based on relative return performance rather than deal metrics.

A sample of 198 deals (2015–2019 vintage deals) managed by 39 managers is included in this study. The benchmark loan...

This article details the track record of redeemed static deals.

Which redeemed deals delivered an equity IRR of over 12.0%? 2020 vintage deals delivered extraordinary IRRs. 2012 vintage deals did well...

This article endeavours to highlight some of the key drivers of 1.0 US CLO equity tranches' outperformance.

This research report is now available to bloomberg terminal users.

This webinar was jointly hosted by Sheil Aggarwal, Head of SCI Valuations, and Poh-Heng Tan, Founder of CLO Research in...

The table below presents the discount margin differential pricing for 2.0 CLO AAA–BB tranches by vintage. Evidently, based on a sample of non-short-dated deals with available discount margin data, 2024 emerged as the year with the narrowest AAA–BB pricing differential.

Some of the most popular articles from the past week are as follows:

As shown in the table below, it is hardly surprising that a robust underlying loan market, coupled with many CLOs...

This study examines a sample of 355 EU CLO deals that remain within their reinvestment periods. Notably, Blackstone, Redding Ridge, KKR, CVC, Partners Group, and Napier Park stood out...

Some of the successful and consistent managers include CSAM, KKR, and CVC.

Below is a table showing the published average total (senior + junior) management fee breakdown by vertical compared to first-loss risk retention deals for each EU CLO manager.

From a sample of 506 deals, 27 EU CLO managers oversee deals with both vertical and first-loss risk retention.

The following EU CLO deals issued and priced their single-B tranches this year. These tranches were originally structured for delayed...

A sample of 1,460 US BSL CLO deals (vintage 2013–2023) is included in this study. Deals with a collateral pool factor below 60% are excluded.

A sample of 506 EU CLO deals (vintage 2013–1H 2024) is included in this study. Deals with a collateral pool factor below 60% are excluded.

The table below presents the estimated historical median pricing DMs for AAA, AA, A, BBB, and BB tranches when the...

The loan index’s moving 4-week average discounted spreads are used as a proxy for the discounted spreads of US BSL CLO portfolios. If the index prices fell below 96, 4-year discounted asset spreads were used instead of spreads to maturity. Arbitrage refers to the index’s discounted spread net of the cost of funding, based on discount margins (of AAA–BB tranches of top-tier deals) rather than spreads. New issue upfront costs and management fees are not accounted for. The loan index used for this analysis is the Morningstar LSTA US B-BB Ratings Loan Index.

As illustrated in the table below, it is unsurprising that when the underlying loan market was strong, more CLO deals were liquidated, institutional loan issuance increased—providing additional collateral assets for CLO creation—and demand for CLOs grew as investors became more optimistic about the credit outlook. Combined with a higher interest rate environment and greater demand for floating-rate assets, these factors contributed to a record-breaking year for new issue CLO volume in 2024.