Month End Summarised Update
Given that CLO deals can be priced to perfection, the underlying modelled collateral spreads (at inception) are important for equity investors as they are key in determining CLO equity tranche issue prices. If a deal were to reveal a much lower first reported collateral spread, the original attractiveness of equity investment at a certain price might change as a result. Which deals (closed in 2021) missed their modelled spreads by 5bp or 10bp? Who arranged those deals?
2021 EU Deals: First Reported Portfolio Margin vs Modelled Margin (Breakdown by Dealers)
2021 US Deals: First Reported Portfolio Margin vs Modelled Margin (Breakdown by Dealers)
2021 EU Deals: First Reported Portfolio Margin vs Modelled Margin
2021 US Deals: First Reported Portfolio Margin vs Modelled Margin
The emergence of the highly mutated Omicron variant is a stark reminder that COVID-19 is not over yet. A closer look at US and EU CLO managers’ investment performance (total/MV/interest alpha trend) since Jan 2020 could give some good insights into their ability to navigate challenging times.
The individual investment performance reports through COVID-19 (relative to their peers and the market) of the managers below are available to premium users.
US CLO Managers
Sound Point
MJX
CBAM
CVC
Anchorage
Invesco
Onex
GoldenTree
Brigade
Sixth Street
Golub
KKR
Neuberger Berman
Ares
PGIM
Octagon
CIFC
CSAM
Blackstone
EU CLO Managers
Barings
Spire
Carlyle
Blackrock
PGIM
Blackstone
Cairn
Investcorp
The 2018 vintage is generally seen as a good vintage from the WACC perspective, partly thanks to the funding provided by a big Japanese bank, but WACC is only a part of the arb picture. CLO Research defines the arbitrage (arb) metric as the underlying CLO annualized collateral return net of the WACC. The 2018 vintage US CLO equity shows an improved arb metric, while the 2018 vintage EU CLO equity continues to display good arb metrics on average.
EU CLO Equity (2018) Scorecard: Latest Arb Returns
US CLO Equity (2018) Scorecard: Latest Arb Returns
Other recent articles:
A Quick Comparison Between US BSL, US MM and EU CLOs (2021)
Global CLO AUM Breakdown
League Table: CLO Manager Global AUM (Breakdown by BSL/MM/EUR)
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; authorized 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.
