How Much Do Issuers “Overlap” in CLOs of Recent
Vintages?

Abstract

The issue of too much overlapping of issuers/borrowers among collateralized loan obligation (CLO) pools has always been a concern for CLO investors. We explore three ways to measure the overlap of issuers among CLOs of recent vintages: 1) counting the number of CLOs sharing identical issuers of loans in their portfolios, 2) seeing which CLOs are more exposed to the most popular issuers, and 3) comparing each pair of CLOs on a one-by-one basis to see how much of their collateral is from the same issuers. Our results show that on a one-to-one basis, the overlap seems to fall within a range of 20% to 55%. For CLOs of the same manager, however, the overlap can go a lot higher. We believe these results should be very important for CLO investors when trying to improve the diversification of their CLO portfolios.