CLOs are not just a hedge against rising rates. They also have historically provided higher levels of income for a lower level of risk – making a clear case for a strategic allocation.
Investors have poured approximately $110 billion into long-term “core” bond categories this year after pulling $80 billion last year as rates rose.1 Adding duration risk likely appeared attractive to those who expected that Fed rate cuts sometime this year may also result in lower long-term bond yields, or at least to lock in yields that were high relative to what we’ve experienced in the last few years. These expectations, so far, have not played out. The Fed has maintained its aggressive stance and continues to indicate no intention to reduce the Fed funds rate this year, while the 10-year U.S. Treasury yield recently hit its highest level since 2007.
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.
