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May 2022 | Issue 245
Analysis
CLOs
We’re drifting apart
Charlie Dinning
Data journalist
Tanvi Gupta
Head of data journalism
Sam Robinson
Head of research
Everyone’s issuing US CLOs these days and it is tempting to believe the crowd of managers is blending into one. However, overall portfolio overlap has dropped to 37.7% across 2021 CLOs
A flurry of deal-making in 2021 has meant that US CLOs are slightly more diversified across the corporate debt issuers they invest in. CLOs that went effective in 2021 have an average overlap of 37.7% as of February, whereas the overlap was 39.3% when Creditflux analysed CLOs that went effective in 2020.
In previous years of analysing CLO portfolio overlap, the largest managers tended to have the biggest overlap with their peers. For 2021 deals, however, Voya Alternative Asset Management has the highest average overlap of 49.54% and is the 12th largest US CLO manager. Morgan Stanley Eaton Vance (45th largest), which follows closely behind, has a 47.57% overlap with the market. Voya has one deal in the dataset (Voya CLO 2021-1) while MSEV has two deals — Eaton Vance 2020-2 and 522 Funding CLO 2021-7.
Voya also has the largest overlap with MSEV — they have 61.21% of their combined portfolio in common. Corporate debt issuers Asurion and Liberty Global are the largest common issuers. Voya holds $4.34 million of Asurion and $4 million of Liberty Global, while MSEV holds $8.15 million of Asurion and $14.73 million of Liberty Global.
MSEV’s largest overlap is not with Voya, but with Carlyle Group at 61.78%.
Top 10 managers’ exposures (%) to largest leveraged loan issuers*
*Managers are top 10 based on the size of their portfolios from deals that went effective in 2021. Loans are largest in our data (see methodology)
Blackstone and CIFC Asset Management have the highest percentage of their portfolios in common, with a 66.05% overlap. Blackstone has 10 deals in the dataset, while CIFC has eight.
The largest five managers in the dataset — Blackstone, Carlyle, CIFC, Redding Ridge and Octagon, respectively — have an overlap of 44% with the market. Of the five, Redding Ridge has the lowest overlap with the market at 43.21% and Blackstone is second lowest at 43.23%.
Black Diamond’s Black Diamond CLO 2021-1 is the most distinct portfolio in corporate debt issuer names. The manager has an average overlap of just 23.12% with the market. Black Diamond CLO 2021-1 priced in November and went effective in December 2021. Fortress (23.98%), Sancus (24.45%) and Zais (24.89%) also have low overlaps against their peers.
66.1%
Overlap of Blackstone and CIFC deals — the highest in our data
Between two managers, Fortress and Silver Rock have the lowest percentage of their portfolio in common, with just 10.4%. Fortress is a regular in this category. For 2020 deals, the manager held the second lowest overlap at 22.03%. The lowest was Guggenheim Investments (21.96%).
Investors will have to consider how aligned takeover CLOs are to a manager’s existing deals. Our data highlights a Carlyle/CBAM overlap of 45.16%. But Trinitas/Carlson have only 29.02% in common.
Still darlings of the CLO market
Altice and Liberty Global are still the most widely held names in the US CLO market. CLOs in the dataset hold $1.54 billion and $1.28 billion of corporate debt notes issued by Altice and Liberty Global respectively. The 10 debt issuers to which 2021 CLOs have highest exposure total $7.97 billion — or 6.09% of the dataset.
Asurion, Lumen Technologies and TransDigm Group are also widely held in CLOs, as they were last year.
Medline is the only new issuer among the current largest loan issuers list after having issued debt via an LBO that closed in October 2021. The LBO was the largest in over a decade, according to Debtwire.
CLOs in the dataset have an exposure of $532.87 million to the debt issuer.
Methodology
- Data includes US BSL CLOs that went effective in 2021. Bond-flex deals, triple C-flex deals and reissues are excluded.
- For each pair of managers, the portfolio overlap figure is calculated from a comparison of the weighted average of common issuers across CLOs in the data. Overlap is based on issuer name.
- Figures are based on trustee reports from Feb 2022 (or closest to that date).
- Manager mergers and acquisitions not closed by Feb 2022 are kept separate.
- All data is sourced from CLO-i and Moody’s Analytics.
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Global credit funds & CLO's
May 2022 | Issue 245
Published in London & New York.
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