EU Module

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

A sample of 218 deals (2015–2019* vintage deals) is included in this study. The benchmark loan index used is the...

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

Throughout 2020 and 2021, Blackrock demonstrated resilience in its total performance. It consistently outperformed the loan index from January 2020 to July 2022, with the exception of April/May 2020. However, the firm’s performance began to decline from mid-2022, as its MV alpha decreased more significantly than that of its peers.

The table below summarises the total, MV, and interest alpha trends for each seasoned manager since 2020.

If these deals are liquidated, UBS AM and Redding Ridge stand to earn incentive fees in the healthy current loan market.

On average, EU CLO managers have met the expectations of their equity investors. Overall, based on deals that have already been redeemed or are anticipated to be redeemed, EU CLOs have delivered good performance, with an average equity IRR of 12.4%. This success can be attributed to a combination of factors, including disciplined issuance spurred by risk retention requirements, resets of more seasoned deals such as those from 2014 and 2015, the resilience of the underlying loan performance, the expertise of the managers, favourable CLO liability costs, and attractively priced assets, among others.

This article explores some of the key arguments for investing in captive CLO equity, how it differs from third-party CLO equity investments, and why it can be particularly appealing from a CLO manager’s perspective.

Overall, based on 97 deals that have already been redeemed or are anticipated to be redeemed, EU CLOs have delivered good performance, with an average equity IRR of 12.5%. This success can be attributed to a combination of factors, including disciplined issuance spurred by risk retention requirements, resets of more seasoned deals such as those from 2014 and 2015, the resilience of the underlying loan performance, the expertise of the managers, favourable CLO liability costs, and attractively priced assets, among others.

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.

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

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.

Tracking ‘below 80 price exposure’ for CLO underlying collateral can be valuable in assessing tail risk within the asset pool. However, it is important to account for the impact of trading activity on these exposures, as CLO managers may have built par or traded out of distressed assets to crystallise portfolio losses. While this metric has its limitations, particularly as it does not fully account for the impact of trading, it remains a useful tool for providing a quick overview of tail risk in a manager’s CLO collateral pool. It is also static in nature, meaning it is not a return-based metric.