The potential of CLO equity

Collateralized loan obligation (CLO) equity has emerged as a source of potentially robust, and front-loaded, returns for sophisticated investors.

Over the past 30 years, collateralized loan obligations (CLOs) have grown from a niche asset class into a $1.2 trillion pillar of the corporate financing markets, representing about 70% of demand for US corporate loans today.1 The variable-rate CLO debt securities issued on the backs of these loans have become a mainstay of institutional portfolios, given their dependable, and frequently attractive, yields.

Yet CLOs offer another attractive option for investors: their equity tranches, which capture the difference between what a CLO earns in loan interest and what it owes the CLO debtholders. For a certain group of discerning investors, this is the most interesting part of a CLO – a hybrid investment combining the prospective double-digit returns of private equity with a quarterly distributed front-loaded cash flow more akin to bonds.

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.

Click to view all articles for the EPIC:
Or click to view the full company profile:
Facebook
Twitter
LinkedIn
Volta Finance

More articles like this

Volta Finance

The rise of CLOs in the global financial system

The integrity of the global financial system has been endangered by a number of external shocks to the economy over the past 20 years, underscoring the necessity for proper portfolio diversification to safeguard investors from negative market

Volta Finance

The Importance of CLOs in Risk Management and Diversification

In an ever-changing landscape of modern financial services, collateralized loan obligations (CLOs) and structured asset-backed security have become crucial in shaping investment strategy, risk management and capital allocation. CLOs – structured security backed by assets –

Volta Finance

A guide to high-yield fixed income alternatives

When investors think of bonds, their minds immediately go toward U.S. Treasuries or other IOUs issued by corporations. Maybe municipal securities enter their minds. But these are just the tip of the iceberg with regard to

Volta Finance

Record CLO sales boost Wall Street buyout financing

Wall Street bankers looking to raise fresh financing for multi-billion dollar buyouts are getting a boost from the record start to the year from a critical part of the leveraged loan universe. Sales of collateralized loan

Volta Finance

Diversified investment opportunities

For the intrepid investor, there is no shortage of diversified investment opportunities. Interest in cryptocurrencies, structured products, direct indexing, and other “trendy” assets has grown in recent years, but a new report by Morningstar suggests that advisors may need