CLOs: Uncover opportunity beyond AAAs

Collateralized loan obligations (CLOs), which are securitized pools of leveraged loans, may provide several attractive benefits within an income-oriented portfolio, including enhanced yields, structural risk protections and diversification. We believe CLOs are particularly attractive in today’s rising rate environment. They pay floating rate coupons that adjust upwards as rates increase and, unlike fixed coupon bonds, won’t suffer price declines as a result of higher rates.

The AAA tranche of a CLO typically comprises more than 60% of a CLO and therefore makes up the largest segment of the CLO market. However, we believe an approach beyond AAA CLOs can allow investors to benefit from enhanced yield potential and capture relative value opportunities from a broader investment universe, while maintaining a high quality, investment grade exposure.

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.

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