Market Overview: Arbitrage and Performance Metrics
As of 28 March 2025, the latest arbitrage metric for US BSL CLOs stood at approximately 217 bps, reflecting an improvement from 212 bps at the beginning of the year.
As of 19 March 2025, seasoned EU CLO managers, on average, had outperformed the loan index on an inception-to-date basis—driven primarily by principal value return outperformance—while interest returns remained broadly in line with that of the index.
Top-Performing CLO Managers
Some of the larger US BSL CLO managers with top-quartile MVOC performance include:
- Oak Hill Advisors
- Benefit Street Partners
- Allstate
- BlackRock
- Golub Capital
- Sixth Street
In Europe, notable larger EU CLO managers with top-quartile MVOC performance include:
- RRAM
- Partners Group
- Napier Park
- Sound Point Capital Management
Based on EU CLO deals that have concluded their reinvestment periods, UBS AM, KKR, and CVC Credit also stand out as top and consistent performers from a CLO equity perspective. Among managers with only two or three deals in the sample, Spire Partners and CIFC have also performed well, with at least two-thirds of their deals in the top quartile.
Based on US BSL deals still within their reinvestment periods, managers such as Oak Hill, CSAM, GoldenTree, Birch Grove, and New Mountain have demonstrated strong performance.
Prepayment Trends: US and EU CLOs
US BSL CLOs:
- For deals that exited their reinvestment periods in 2022, the median annualised prepayment rate was 11% in year 1 (range: 6%–17%) and rose to 27% in year 2, with a wider interquartile range.
- For those that exited in 2023, the year 1 median was 20% (range: 12%–27%) and increased to 34% in year 2, with a narrower interquartile range.
EU CLOs:
Looking at annualised post-reinvestment period prepayment rates for 239 seasoned EU CLO deals across years 1 to 4, 18 deals recorded single-digit prepayment rates in each of the first three years post-RP.
Static CLO Structures and Call Dynamics
Out of 116 EU CLO deals that have either been redeemed or are expected to be fully redeemed, 9 were static deals. These delivered strong performance, with an average IRR of 33.6%—6 of which were managed by Palmer Square Capital Management.
Static deals can be highly effective in volatile markets:
- In weak markets, slower prepayment rates help preserve the highly levered structure, supporting strong annual distributions.
- In strong markets, rapid tightening of asset and liability spreads can lead to early calls—particularly advantageous for static deals with short non-call periods.
- Conversely, deals with long non-call periods (e.g. two years) may experience costly delays in a spread tightening environment.
Equity Performance and Incentive Fees
Eleven EU CLO deals have already met their IRR incentive fee thresholds of 12%, supported by robust equity distributions. Most of these were:
- Issued in 2016 or earlier
- Reset to extend deal life and allow for sufficient equity distributions
The total incentive fees distributed to date across these deals amount to approximately EUR 24 million.
Deal Spotlight: Cairn CLO X
Cairn CLO X equity traded with a released cover price of EUR 46.3, equating to a primary equity IRR of 13.7%. Its strong performance was largely supported by an annual distribution of over 18%, sustained over more than six years.
Equity NAV Comparison: EU vs US CLOs
EU CLO equity NAV metrics surpass those of US BSL CLOs across nearly all vintages—except for 2022 and 2023—despite US deals generally having more diversified underlying portfolios.
Notably, EU CLOs from the 2013–2014 and 2018 vintages show significantly higher equity NAVs than their US counterparts.
BWIC Data Insight: US CLO Equity (2021 Vintage)
Based on SCI BWIC data from 17 July 2024 to 8 March 2025, approximately 66 US CLO equity tranches from the 2021 vintage appeared on BWIC lists with colour from list owners.
- Median IRR: 7.8%
- 75th percentile: 12.3%
- 25th percentile: 3.0%
Disclaimers
The information, research, data, research-related opinions, observations, and estimates contained in this document have been compiled or arrived at by CLO Research Group, based upon sources believed to be reliable and accurate, and in good faith, but in each case without further investigation. None of CLO Research Group or its service providers; authorised personnel, or their directors make any expressed or implied presentation or warranty, nor do any of such persons accept any responsibility or liability as to the accuracy, timeliness, completeness, or correctness of such sources and the information, research, data, research related opinions, observations and estimates contained in this document. All information, research, data, research-related opinions, observations, and estimates in this document are in draft form as of the date of this document and remain subject to change and amendment without notice. Neither CLO Research Group nor any of their third-party providers shall be subject to any damages or liability for any errors, omissions, incompleteness, or incorrectness of this document. This article is not and should not be construed as an offer, or a solicitation of an offer, to buy or sell securities and shall not be relied upon as a promise or representation regarding the historical or current position or performance of any of the deals or issues mentioned in it.
