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Global credit funds & CLO's
January 2023 | Issue 251
Published in London & New York.
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Opinion
January 2023 | Issue 251
Past returns
Making CLO triple As more secure
10 years ago in Creditflux, we reported on super-senior tranches being inserted into US CLOs. Morgan Stanley’s Sajid Zaidi told us that investors were not fearful of losses, but wanted protection from a downgrade from triple A. A junior triple A tranche served as a buffer against this.
Depending on the thickness of the junior triple A class, split CLO triple A tranches can be expensive, but they are a useful option.
As Creditflux goes to press, Sound Point XXXV has two triple A classes. The $240 million senior class attaches at 40% and priced at 225 basis points, while the $18.8 million junior piece attaches at 35.3% and pays 285bp.
Points up front
Dealscribe scores eyeballs
The unfamiliar advent of a winter football World Cup has forced many people to choose between seasonal festivities and watching sport. Spare a thought then for CLO market participants who would have been kept from the action by the Opal CLO conference in California in early December.
Ordinarily at the event, talk of CLO par sub surpasses chatter about footballing super subs, but the 2022 World Cup has been particularly enthralling.
Officials at Dealscribe were wise to this — a monitor with live action from the football was a prominent part of the CLO documentation firm’s exhibition stand at the event. We’re told the stand attracted a fair crowd of passers-by who, ostensibly, wanted to see how Dealscribe tracks ESG scores and portfolio line-ups.
1-0 to Dealscribe: tech firm uses Mbappe — instead of OMs — to generate interest
Whatever the size, CLO performance dwarfs others
A graphic depicting the investment fund universe was doing the rounds on social media late in 2022. The image shone a light on how a limited number of small funds could produce astronomical returns, and that larger funds tend to slightly lag the market.
Mid-sized fund managers often say they have the perfect mix of obtaining allocations while staying nimble and the graphic bears this out. But whatever the size of these funds, it’s fair to say the fund universe has been eclipsed by CLO performance.
THEY SAID IT
“You have to question whether the vast array of CLO managers should be able print new deals”
Fairwater Capital founder Orlando Gemes posted on LinkedIn that CLO equity returns in 2023 have not been high enough to justify the number of CLO issuers.