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Comparison of Non-Reset CLO Equity Tranches: US BSL vs EU (Vintage 2017-2020)

CLO ResearchAugust 29, 2023

US CLOs generally enjoy a competitive edge over their EU counterparts in the realm of equity distributions, primarily due to a more favorable interest rate environment in the U.S. Nevertheless, despite the disadvantage posed by the EU's lower interest rate environment, CLO deals from 2017 and 2018 in the EU display notably better NIM and first distribution metrics. These strong figures effectively offset this drawback, as highlighted by their robust annual distributions.

Assessing the Performance of Equity Tranches in Reset EU CLO Deals (Updated)

CLO ResearchAugust 21, 2023

For the older vintage deals, the median annual distributions were largely in the 13-15% range. However, the median 2014 and 2015 vintage deals stood out with impressive 14.5-14.9% annual distributions. If the 2014 median equity tranche can be sold at a price of EUR 34, then the primary equity investor would achieve the target 12.0% IRR over an 8.7-year period, assuming an issue price of EUR 95.

Assessing the Performance of Equity Tranches in Reset US CLO Deals (Updated)

CLO ResearchAugust 18, 2023

In essence, resetting a deal extends the total reinvestment period, which is positive from an equity standpoint. If a CLO deal can generate an annual equity distribution of 13–14 points over a period of 8–11 years, its equity is likely to perform reasonably well, even if its final equity NAV is poor. It’s worth noting that most of the seasoned reset deals were active during a period of very low-interest rates.

In-Depth Analysis of US CLO Manager Performance and Metrics Based on Their 2021 Deals

CLO ResearchAugust 15, 2023

This study underscores the significant divergence in investment performance between the top and bottom 10 US CLO managers based on their alpha. The findings emphasize the critical role of effective manager selection in achieving favorable results. While metrics like par build and weighted average price offer insights, they don't tell the whole story. Conversely, the average WAS, WARF, and liquidity depth metrics for both groups show minimal variance, indicating a limited correlation of these metrics with investment performance based on this sample.

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