In 2021, specialist asset managers created over $500 billion in CLOs, benefiting from substantial post-pandemic monetary support. However, momentum has slowed in the first half of this year, with only about $69 billion launched or refinanced, a 41% drop compared to the same period in 2022, as per JP Morgan data.
Hedge funds, insurers and asset managers, attracted by the higher yields in low borrowing costs environments, show a strong preference for these financial instruments. They make up 60% of the demand for single B-rated or lower junk loans, as reported by S&P Global Ratings. Experts explain what sets this market apart.
“Improved liquidity dynamics”
Paul Saint-Pasteur, global fixed income portfolio manager at Payden & Rygel, explains that securitised products like CLOs offer diverse exposure to various collateral types. Each tranche in the capital structure offers distinct risk, return and liquidity profiles, allowing for tailored portfolio customisation
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.