CLO Musings – The Opposite of a Goldilocks Market
A Goldilocks loan market environment is generally most favourable for CLO equity—aside from the pull-to-par trades observed in 2020, 2022,...
A Goldilocks loan market environment is generally most favourable for CLO equity—aside from the pull-to-par trades observed in 2020, 2022,...
While primary issuance volumes are on track for another record year, recent secondary trading colour points to a more challenging...
The steady loan spread compression since early 2024 has been particularly negative to long-dated CLO equity, especially those issued in 2024 that remain in their non-call period. This feature benefits CLO debt investors, who are able to lock in wider spreads for longer, but comes at the expense of equity holders.
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.
Investing in CLO equity demands a thorough understanding of the asset class and a carefully considered strategic approach. As a first-loss investment, it carries inherent risks, but it also offers the potential for substantive returns. The performance of CLO equity investments is influenced by several key factors.
The following EU CLO deals issued and priced their single-B tranches this year. These were initially structured for delayed issuance...
