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Drawing upon EU CLOs from 2013-2022, the underlying collateral maturities for 2024 have witnessed a YTD decline of 67%, a figure attributable to refinancing and extension activities, as well as the redemption of CLOs.

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.

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.

Given the similarity in average annual sale volumes between these two sets of managers, it becomes apparent that the volume of trading has limited influence on the alpha performance of managers, as per the findings of this study. It is worth noting that both active and less active managers, in terms of trading activities, are well represented in both the upper and lower segments of manager performance.

Blackstone stands at the forefront as the leading EU CLO manager, with a substantial AuM of €11.8 billion. CVC Credit Partners secures the second spot among EU CLO managers, boasting an impressive AuM of €10.8 billion. Meanwhile, the Carlyle Group holds a strong position as the third-ranked EU CLO manager, managing an AuM of €10.6 billion.

Please see the table below for the full list of US CLO managers and their assets under (US CLO) management (billion) as of 30 June 2023 based on LCD and Intex data. If you’re an investor in the CLO market, we would like to invite you to register with us using your business email address to gain access to our freemium service. Our freemium service is designed to provide you with a glimpse into the value of our premium content and help you gain valuable insights and perspectives in a complex and dynamic market.

The following table provides a summary of the cumulative CLO equity distributions for 140 deals that have experienced failure in one or more of the crucial tests, namely interest diversion, overcollateralization, or interest coverage tests. Approximately three-fourths of these 140 deals have cumulative equity distributions of less than 100%.

Below are tables presenting the MVOC (AAA-B) and EQ NAV of EU CLO deals by vintage, based on asset prices as of 16 June 2023.

Below are tables presenting the MVOC (AAA-B) and EQ NAV of EU CLO deals by vintage, based on asset prices as of 9 June 2023.

Tracking price buckets at 80/70/60 or below for CLO underlying collateral can be useful in assessing tail risk in the asset pool. Among these price buckets, those at 60 or below can be particularly valuable in identifying assets that are truly distressed. However, it’s still important to consider the impact of trading activity on these buckets, as CLO managers may have traded out of distressed assets to crystallize portfolio losses. Therefore, it’s important to evaluate a manager’s performance as a whole. The following tables show the price buckets at 80/70/60 or below for US and EU CLOs by vintage, based on asset prices as of 2 June 2023.

Typically, newer vintage deals tend to be ‘cleaner,’ but apparently, the 2021 EU CLO single-B MVOC metrics do not look as good compared to those of more seasoned deals (2016-2020). The median BB MVOC metrics are fairly similar across deals from 2013 to 2021, which also implies that older vintage deals have performed quite well compared to their newer counterparts.

Considering the current CLO equity NAV metrics for the seasoned deals, with approximately 58.1% of 2012-2018 deals having a negative equity NAV, it is highly unlikely that many of these deals would be redeemed anytime soon, even if their equity distributions are poor and they appear ripe for a call.

Typically, newer vintage deals tend to be 'cleaner,' but apparently, the 2021 EU CLO single-B MVOC metrics do not look as good compared to those of more seasoned deals (2016-2020). The next table shows the BB MVOC metrics for each semi-annual vintage. Notably, the 2H 2022 and 1H 2023 semi-annual vintage deals have some of the best MVOC metrics.

Considering the current CLO equity NAV metrics for the seasoned deals, it is highly unlikely that these deals would be redeemed, even if their equity distributions are poor and they appear ripe for a call.

The top-performing US CLO managers have been identified based on their total return alpha performance, as evaluated across a sample of 177 deals issued in 2021. Out of a total of 64 managers, the top five managers have been analyzed for their industry overweight/underweight. The table below illustrates their latest overweight/underweight standings.