Back to Basics: CLOs

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Collateralised Loan Obligations, or CLOs, are bond instruments issued to fund a specific pool of loans, typically senior secured or ‘leveraged’ loans, to companies. The bonds are split into tranches that can carry different ratings (and yields) according to how senior they are in the CLO’s capital structure, normally from AAA notes at the top, to equity notes at the bottom. The way CLOs are structured means they are designed to withstand very tough conditions, as can be seen by the fact that default rates throughout the global financial crisis were amongst the lowest in fixed income. Fast forward to today where we are in an environment that could see global recessions, the defensive characteristics of the asset class will come to the fore. 

On our next educational webinar in our 'Back to Basics' series Aza Teeuwen (Partner, Portfolio Management) and Elena Rinaldi (Portfolio Management), provided a comprehensive understanding of the key aspects and trends within the European CLO market. 

 

 

 

 

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About the authors
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