September 2021 | Issue 238
CLO thought leadership Sponsored by Moody's Analytics

An alternative way of looking at CLO overlap

Analysing CLO collateral to look for overlap is critical for any CLO investor, but it is normally done either within a portfolio of CLOs or by bilaterally comparing two managers. In one of its latest research pieces, Moody’s Analytics has taken a different approach by comparing the collateral of a group of managers with their cohort, creating a new metric for manager analysis.
The analysis looks at the US broadly syndicated loan CLO collateral of the 50 largest managers, and compares it to the average of the 50 managers in the cohort. The overlap is then calculated as the sum of the minimum percentage holding of each asset of the specified manager and the average percentage holdings of each asset for all 50 managers. The result of that analysis shows a wide divergence in overlap, ranging from 19% of the collateral to 55%, with an average overlap of 42%.
This research looked at 1,853 issuers with total holdings in the CLO universe greater than $1 million. On average 24.2% of the 50 managers had exposure to an individual issuer, but as you would expect there was a notable size bias.
All analyses were performed on 50 largest CLO managers
For the 136 largest companies (those with $1 billion and above of collateral held by CLOs) the exposure among the managers was 66% on average. The importance of some names to the market was also clear. 33 issuers were held by at least 40 of the 50 managers, with Liberty Global and Altice USA both held by 49 managers (see table below).
When looking into how the overlap varied in each manager some trends are obvious, and unsurprising. There was a clear correlation between the size of the manager and the amount of overlap in their portfolio (see chart). It’s a well-known truism in the market that smaller managers can be more flexible in what they buy. As this research only looked at overlap among the 50 largest managers this suggests that the overall exposures to a given issuer are likely to be a little lower for the CLO market as a whole if you include smaller managers as well.
It is also clear that managers active in the bond flex CLO or middle market CLO space have less overlap than their peers — even with their broadly-syndicated loan CLOs
That correlation may be explained by a preference among larger managers to hold paper from larger issuers, but they aren’t the only managers to prefer that approach. Nuveen and PineBridge Investments both stood out among the smaller managers in this group as having a greater emphasis on large issuers, and a higher overlap as a result.
It is also clear that managers active in the bond flex CLO or middle market CLO space have less overlap than their peers even with their broadly-syndicated loan CLOs, presumably as they brought some of the experience over. For example, Fortress, Anchorage and Golub had the lowest overall exposures among the 50 managers analysed.
Despite these broad trends the report shows plenty of variation based on manager style as well. Credit Suisse Asset Management, despite its size, had an overlap of 39.4%, below the average, compared with peers such as Carlyle Group or CIFC Asset Management who both had an overlap above 50%.
The development of metrics like overlap provide another tool for investors to screen managers as they think about their overall portfolio.

To access the full report please contact Sam Suayan (
*as of 7 June 2021 for issuers with at least $1 million in CLOs Source: Moody’s Analytics Structured Finance Portal
Source: Moody’s Analytics Structured Finance Portal
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Global credit funds & CLO's
September 2021 | Issue 238
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