Collateralized loan obligations (CLOs) were abandoned after the global financial crisis (GFC) of 2007-2009. Since then, CLOs have made a comeback due to their strong performance during the GFC and beyond. CLO notes issued before the GFC did not have material defaults, and many CLO equity securities issued then ended up with annualized returns above 20%.
By 2021, the CLO market had surpassed $1 trillion assets under management and had replaced banks as the largest lender to private-equity-backed companies.
In its 2020 second quarter report on CLOs, Standard & Poor’s reported that two-thirds, or $2.1 trillion, of leveraged-loan issuance since the GFC had been funded by CLOs. Among the broad range of financial institutions that invest in CLOs are banks, insurers, pension funds, mutual funds and hedge funds. Ratings-based capital regulation incentivizes banks and insurance companies to purchase highly rated debt instruments that reduce capital charges.
Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.
