*Key Ingredients for Long-Term CLO Equity Outperformance*
A successful long-term CLO equity investment hinges on three critical pillars: strong annual distributions, healthy equity NAVs, and a longer-than-average deal life. In summary, while past performance is not indicative of future results, selecting a group of consistently high-performing managers—demonstrating strong asset-side execution—combined with appropriate structural features, competitive liability pricing, and well-timed execution, significantly enhances the likelihood of success across the three core pillars. A more objective way to evaluate a manager’s capability is by examining the inception-to-date gross annualised collateral return of their deals, measured relative to the relevant loan indices and assessed on an unlevered basis. This provides a clearer measure of true alpha generation.
