Asset managers typically purchase 200+ senior-secured corporate loans to form a CLO.
To fund the purchase of the loans, the manager sells stakes in its CLO to debt and equity investors.
The debt portion of the CLO is organized into multiple levels, known as tranches, that investors can select from. A final equity tranche sits at the bottom.
As loans in the CLO distribute principal and interest, cash flows from the top tranche down on a quarterly basis.
Not until all interest owed to the AAA tranche is paid does AA receive payments, and so on.
We believe the BBB and BB tranches of CLOs have the opportunity to deliver some of the most attractive risk-adjusted returns in fixed income.
The BBB and BB tranches that our Funds target historically offer higher yields than similarly rated corporate bonds and other structured products.
Historically, the CLO structure has proven to be extremely resilient through multiple market cycles.
Wider spreads, a measure of credit risk, allow CLOs to be purchased at a potential discount. As spreads normalize, CLO resale prices are expected to rise.
We have partnered with Prytania Asset Management as the sub-advisor for our Diversified CLO Funds.
$1T+
CLO market globally¹³$2.2B+
Prytania AUM20 yrs
Prytania years in businessThese slides explore the fundamentals of CLOs and how the unique tranche structure helps protect investors.
Mark Hale, CEO and CIO of Prytania, joined Yieldvilla to discuss the benefits of CLOs for investors.
See how CLOs compare to various fixed income and structured products.