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CLOs for All Seasons

  • Strategy Deep Dives

CLO structures incorporate mechanisms designed to protect investors across varying credit environments. Historical performance data from Standard & Poor’s confirms negligible defaults across multiple stress periods, from the 2008-09 crisis through the recent inflation cycle.

In the latest article in our CLO Insights Series, produced in association with Weil, Gotshal & Manges (London) LLP, we provide an analysis of:

  • Matching principles: How CLOs are designed to limit interest rate, currency and maturity mis-matches.
  • Portfolio construction: Asset selection process and the role of eligibility criteria, collateral quality tests and concentration limits.
  • Active Management: The benefits of a dynamic approach to portfolio management.
  • Risk retention: Regulatory frameworks requiring 5% economic interest alignment.
  • Protections: Tools available to CLO managers for managing distressed and defaulted assets.
  • Amortisation: Investors are repaid from amortisation of the underlying investments
  • Looking forward: What to look out for in the future.

Current market conditions, including increased uncertainty around default trajectories, spread compression and asset availability, underscore the relevance of these structural protections.

Read the analysis below.

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Robert Reynolds

Managing Director, Head of CLOs

Robert is a Managing Director and Head of Collateralised Loan Obligation (‘CLO’) for Pemberton. CLOs invest in broadly syndicated leveraged loans and Robert is responsible for building Pemberton’s CLO business into an innovative platform.

More about Robert Reynolds

Other Insights Within the Same Category

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    Introduction CLOs are floating rate products, which means that both assets and liabilities are linked to prevailing market rates (benchmark interest rates). This is one of the matching principles that underpins the CLO model (see CLO Insights – CLOs for All Seasons) and serves to reduce duration risk. This feature also has an incidental role […]

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  • A Guide to CLO Documentation

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    CLO Documentation can seem daunting at first, but every document exists for a reason. In our latest CLO Insights Series, produced in association with Weil, Gotshal & Manges (London) LLP, we walk through the full suite of documents that govern a CLO: what they contain, how they fit together, and why they matter to investors.

  • CLO Risk Retention Deep Dive

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    Risk Retention, sometimes referred to as ‘skin in the game’, is an important requirement serving to align the interests of investors and other parties in a CLO transaction.  In our latest CLO Insights Series, we take a deep dive into the Risk Retention Rules, examining how they apply under both EU and UK securitisation regulations […]

  • The Importance of Portfolio Optimisation

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