How to evaluate CLO managers
Portfolio manager incentives and MVOC volatility are crucial factors for CLO equity investors, says Dagmara Michalczuk

CLO equity has an 11-year track record of consistent mid-to-high teen returns
Distributions by MM CLOs are based on underlying loan performance, not market sentiment

Points up front: Whatever the size, CLO performance dwarfs others
A graphic depicting the investment fund universe was doing the rounds on social media late in 2022...

"CLOs could withstand another 13.4% of downgrades to triple C if the price drops to 50"
CLOs are well positioned, even if there are mass downgrades to triple C  

Past returns: Alhambra CLO paves the way
Five years ago in Creditflux, we reported that Be-Spoke Capital was launching the first SME European CLO since the financial crisis.

Points up front: CLO managers didn’t take advantage of volatility, say CLO managers
Creditflux’s CLO Census shows CLO managers can be hard on themselves

Points up front: Exhibit A: every single CLO slide deck ever
In a recent note, the National Association of Insurance Commissioners said they needed “more data to showcase that CLO pools have outperformed the loan market”

"The equity IRRs of enhanced CLOs are nearly all in the bottom decile of the market"

CSAM does the CLO awards double
Winning the Creditflux Manager of the Year award is a feat in itself. Winning it back-to-back in such different markets is an outstanding achievement — and CSAM can take great pride in it

Past returns: Silvermine CLOs splash the cash
In Creditflux 10 years ago, we reported that three Silvermine Capital CLOs, which had built up $646.5 million of cash, had started buying loans again

We’ll get through this awkward patch
Wide liabilities have made pricing CLOs trickier in the past few months. But speakers at Creditflux’s CLO Symposium were optimistic that the arbitrage is OK — so long as you can place those triple As

"Wholesale moves into risk areas after internal changes should sound an alarm"
The composition of CLO managers is changing, so management styles may drift  

"We again have to flag up information in CLO marketing pitches that can mislead investors"
Cash-on-cash returns, default records and leverage statistics don’t always give CLO investors the full picture  

Past returns: KKR’s unusual CLO liquidation
Five years ago in Creditflux, we reported that junior debt investors in a KKR-managed European CLO voted to alter the deal’s documentation so they could drive a liquidation of the legacy deal, such that they would receive roughly 92% of par

Everyone’s ramping

"Three CLOs issued in 2021 have included triple C baskets of 20%"
Big triple C buckets helped mid market CLO issuers in 2020 and the trend is for even bigger allowances this year

"CLO managers who struck the right balance in 2020 are more easily able to reset their deals"
CLO managers were re-evaluated during the pandemic, and outperformers can expect to see benefits this year

CLO naysayers have made arb and cov-lite into dirty words — that should now change
Recent performance has shown that cov-lite loans and challenging arb don’t spell doom for CLOs 

The tide has turned… the solution for investors is to move into floating rate loans
2020 was the year of fixed-rate bonds, but treasury curves are steepening and demand for loans is heating up

Past returns: Barclays gambles and wins on Zohar
Five years ago in Creditflux, we reported how Barclays had made gains from its investment in the debt of Zohar CLO I, a deal which was filed into bankruptcy by manager Patriarch Partners a few months earlier

Don’t obsess over the state of your OC cushions
During Creditflux’s live CLO webinar last month, panellists agreed that fighting to keep an over-collateralisation test in compliance could do more harm than good in the long term

Some managers calculated their CLOs were passing OC tests, only to find them failing the next day
Corporate credit downgrade storms have been weathered before, but this one has come out of season

They said it: There will be a re-tiering of managers after this
"There will be a re-tiering of managers after this"

Points up front: Senior tranches pay down despite junior OC passes
192 US CLOs have breached at least one over-collateralisation test, according to CLO-i, but at least two deals have not followed the conventional path

Where are the gloating I-told-you-so columnists who claimed CLOs would bring global destruction?
We have seen a measured response to the coronavirus crisis: fund managers aren’t collapsing and investors are not shunning CLOs