CLOs

TwentyFour Asset Management's annual conference took place virtually for the second year running on September 15 & 16, with hundreds of attendees tuning in live for interactive sessions with TwentyFour's portfolio management team.

BWIC – or bids wanted in competition – lists, are a unique characteristic of the ABS and CLO markets, where they are widely used in secondary trading when investors are looking to sell bonds.

Based on these metrics, the picture seems rosy, and credit performance looks set to continue through the second half of the year should the main drivers of the recovery remain intact.

2021 looks set to become a post-financial crisis record year for European CLO issuance and refinancings, but amid the rush of activity we are seeing a concerning trend for weaker documentation in refinanced deals that in our view investors need to fight against.

I think it’s likely we’ll see new cycle tights for the European CLO sector this year, so in addition to healthy income we believe there is plenty of room for capital appreciation as prices are being pushed higher in the secondary market.

In this update, TwentyFour Partner and Portfolio Manager Ben Hayward addresses some of the key reasons he thinks investors should consider allocating to ABS sooner rather than later.

TwentyFour AM partner and portfolio manager Douglas Charleston discusses Q4 performance for ABS markets and provides his outlook for 2021.

Our analysis indicates European ABS investors can carry forward little concern about nasty default surprises, and this is likely to be important when considering total returns for 2021.

Elena Rinaldi looks back at the performance of European CLOs in 2020 and explains how post-vaccine sentiment should help boost recovery in 2021, providing a positive outlook for CLOs.

Overall CLO and loan performance have exceeded our expectations, though there are still plenty of headwinds for the market, chief among which is the prospect of further lockdowns and more economic disruption as Europe battles a second wave of COVID-19 cases.

There are still plenty of potential bumps in the road (Brexit, the US election, COVID-19 developments and so on) but the positive technical created by dwindling supply has the potential to push spreads tighter in coming months.

We expect September to be relatively busy with new ABS deals, but there’s a very strong technical developing in favour of ABS and CLOs, which should help performance in the coming months.