In recent years, collateralised loan obligations (CLOs) have become increasingly common in financial markets. Their mix of above-average yield and potential for income has proved attractive in the past. They are often misunderstood because the principles on which they operate, the benefits they can offer and the risks they entail are not always easy to understand. An in-depth study by Vontobel Asset Management attempts to shed light on their structure and relationship to ESG.
What are CLOs?
Collateralised Loan Obligations (CLOs) are debt instruments that back a group of loans, often senior secured loans or leveraged loans to companies. These securities are divided into tranches with different ratings and yields based on their position in the CLO’s financial structure, from AAA (the most secure) to equity (the least secure).
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.