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Trade vs. Settled

  • Strategy Deep Dives

Most collateralised loan obligation (CLO) metrics, including Portfolio Profile Tests, Collateral Quality Tests and CLO Coverage Tests, are calculated using the traded balance. Cash flow available to pay noteholders, however, depends solely on the settled balance: the principal and interest that have actually been received. Managing the gap between the two is a core part of running a CLO.

In the latest instalment of our CLO Insights Series, Traded vs. Settled, we examine how this distinction plays out in practice within a CLO structure: delayed compensation and cost of carry on secondary market trades, the settlement constraints specific to the primary market, and what these mean for structuring positions in a CLO versus a warehouse.

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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

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