Published in London & New York
10 Queen Street Place, London
1345 Avenue of the Americas, New York
Creditflux is an
company
© Creditflux Ltd 2024. All rights reserved. Available by subscription only.
Analysis CLOs
CLO strategies outperform again
by Tom Davidson & Robin Armitage
In 2023, our index of funds investing in CLO tranches and equity returned 22.9%. In the first six months of this year, the index reached 9.9%, as these funds again delivered outstanding results
Our fund data tracks the monthly performance of almost 130 credit funds, split across a wide variety of asset classes and strategies. With the final returns for June gathered, we look back over their performance in the first half of this year.
The first trend to leap out of our indices is a familiar one, as CLO funds again take top spot. Our index for the category tracks the median monthly performance across funds where the majority of assets are CLO debt or equity, and it hit a 9.9% return in the first half of the year. This is comfortably ahead of every other strategy — and follows an outstanding 2023, when the full year performance of our index reached 22.9%.
Top 4 Creditflux indices cumulative returns (%)
Source: Creditflux (see methodology)
Given this performance, it isn’t surprising that CLO funds dominated our list of the top performing credit funds this year, taking an almost clean sweep of the top 14 positions. Even that ‘almost’ may be arguable, as the sole outlier was the Spire Partners Credit Strategies Sub-Fund, which came second in our listing. While it has a mandate to range across loans, bonds and structured credit, it invests heavily in CLO equity and debt.
17.4
%
First half 2024 return by top performer Alegra ABS 2
Alegra’s 17-year-old fund wins out
The top performer of the year so far is a pure CLO fund. Alegra ABS 2 is a veteran fund managed by Switzerland-based Alegra Capital. The fund returned 17.44% in the first six months of the year. This performance takes it to a 13.1% annualised return since inception as the fund turns 17 years old.
Last month, Tarun Buxani, partner, said: “Performance so far this year has been driven by capital appreciation on shorter junior mezzanine notes and strong cash-on-cash equity distributions. In May, this was enhanced by a CLO liquidation recovering more than its carrying value through the equity, and from an uplift in other positions that could benefit in a similar manner.”
We explore the renewed interest in CLO equity here, and Buxani sees that as an area that will continue to drive returns. “Going forward, the fund’s prospects are supported by robust cashflows projected on equity exposure that remains fully invested, further optimisation of key equity positions, including via possible refis or resets, and by continued scope for capital gains on larger CLO debt holdings.”
Multi-strategy funds are second to CLOs
Moving beyond the dominance of CLO tranche investing, our second and third placed categories so far this year were close, with credit multi-strategy funds returning 6.0% year to date, and structured finance funds a touch less at 5.78%. As chart 1 shows, that close performance is also replicated when looking over the past 18 months of data.
As mentioned, the top-performing credit multi-strategy fund was the Spire Partners Credit Strategies Sub-Fund, which has returned 17.43% already this year. The other multi-strat fund to make the top 20 is Cartesia’s MWM1 — Dette Européenne Strategique. It also follows a similar broad strategy across bonds, loans, funds and structured credit (including ABS and CLOs).
The other non-CLO fund to make the top half of our table is something of an outlier. LCC Latam Consumer Credit Fund has returned 10.9% in the past six months, thanks to a unique strategy investing in personal consumer credit instruments across countries and currencies.
Source: Creditflux (see methodology below)
Methodology
- Our credit hedge fund listings track performance for each fund. One-month performance is the change in a fund’s NAV per share at the end of one month compared to the end of the previous month, expressed as a percentage. Year-to-date performance is calculated from the one-month performance.
- All returns are shown net of manager fees.
- Our indices for each category are the median monthly return of funds in that category. There are no fees associated with listing a fund. If you would like to have your fund listed please contact robin.armitage@iongroup.com.
