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.
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