Private debt investing: Exploring Collateralized Loan Obligations

Private credit investing has gained momentum in recent times compared to other asset classes.

PitchBook estimates that private debt now makes up about 10% to 15% of total assets under management (AUM) in the private markets, ranking it as the third-largest asset class after private equity and real estate.

Private debt encompasses various important aspects, including Collateralized Loan Obligations (CLO) and Business Development Companies (BDC):

  • Collateralized Loan Obligation (CLO): CLO serves as an investment instrument, backed by a pool of debt with different credit ratings and repayment structures. Investors gain exposure to a diversified portfolio of existing bank loans and receive scheduled interest payments from these loans. However, in the event of borrower default, investors assume a significant portion of the risk.

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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