Tag Archives: Musings

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CLO Market Musings: New Issue BB Pricing

Recent primary CLO and reset prints at the BB level suggest that demand for BB is very strong. Anecdotally, it appears that numerous investors in the market have a preference for the risk-return ratio of the BB tranche. The carry is solid, and the BB tranche has demonstrated resilience across various credit cycles.

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CLO Research: Year-End Review (Updated)

In the US CLO market, the size of managers plays a role, with larger, seasoned managers generally outperforming their smaller counterparts. This observation is based on a sample of seasoned deals from 2015 to 2019. However, it’s important to note that this trend is not universally applicable, as variations in performance are observed among both large and small managers. In contrast, in the European CLO market, the size of managers does not appear to be a decisive factor in asset outperformance. Recent analysis of deal performance, particularly of the 2021 vintage, indicates that small European CLO managers are significantly represented in the top quartile, as assessed by their annualized alpha performance since inception.

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CLO Market Musings: Timing the New Issue Market

Historically, pricing a CLO deal has proven more straightforward when the loan market is robust and stable. As illustrated in the table below, approximately 75% of US CLO deals were priced when the Morningstar LSTA US B-BB Ratings Loan Index's bid price was 97 or above, with around 61% of deals priced at an index bid price of 98 or higher.