EU CLO Performance: Horizontal vs. Vertical Strip Risk Retention
How did deals with vertical strip risk retention perform vs. deals with horizontal slice risk retention? This study examines a...
How did deals with vertical strip risk retention perform vs. deals with horizontal slice risk retention? This study examines a...
This study examines a sample of 218 deals from 2015 to 2019, utilising the Morningstar European Euro-Denominated Loan Index as the benchmark loan index.
It was an absolute pleasure to present at the IMN & FIIN Euro CLO Conference on 20th March 2024. Please find the link below for the presentation slides.
Managers with top-tier AAA spreads of 150 bps or tighter, based on median metrics, have consistently outperformed both the industry’s average and median alpha performance. Year-to-date, managers who have achieved AAA spreads of 150 bps or tighter include Blackstone, Blackrock, CIFC, Goldentree, Octagon, Ares, NB, PGIM, CVC, Oah Hill, Palmer Square, Elmwood, and Allstate.
Outperforming the loan index over a sustained period of time is no easy feat.
Notably, since late 2020, US CLO managers have, on average, been adding value for their investors. This trend is illustrated by the blue line in the chart, which remains in positive territory. The annualized total return alpha since inception reached its peak around October 2021. This suggests that, on average, US CLO managers tend to add more value during particularly robust market periods. It is important to note, however, that the chart is based on averages. Nevertheless, there are managers who consistently add value in both weak and strong markets.
