Investor Views on CLOs: Assessing Sector
Opportunities and Evaluating a CLO and Its Manager

Abstract

U.S. collateralized loan obligations (CLOs) continued their strong comeback in 2012. Because most CLOs are passing their overcollateralization or reinvestment test, the majority of equity tranches are cash flow positive. The panelists can clearly see a divergence of performance among top and mediocre managers. In the question and answer section, the panelists addressed how manager performance is measured from both the equity and the debt perspective, what other qualitative measures are considered in the evaluation of a manager, how first-time CLO managers should be evaluated, the outlook for CLO performance, which parts of the capital structure in primary and secondary CLO transactions offer the best value, the main risks to the positive momentum in new-issue CLO volume, and the panelists’ forecasts for full-year CLO issuance.