RT Journal Article
SR Electronic
T1 How to Value CLO Managers: Tell Me Who Your Manager
Is, I’ll Tell You How Your CLO Will Do
JF The Journal of Structured Finance
FD Institutional Investor Journals
SP 49
OP 56
DO 10.3905/jsf.2013.19.3.049
VO 19
IS 3
A1 Serhan Secmen
A1 Batur Bicer
YR 2013
UL https://pm-research.com/content/19/3/49.abstract
AB Collateralized loan obligations (CLOs) have proven to be a unique securitized product, especially in light of their significant outperformance compared with that of their asset-backed peers during and after the most recent crises. Having a pool of loans as the underlying collateral that is actively managed by CLO managers has been the most important factor for this performance. Therefore, an astute CLO investor needs to analyze the manager as well as the collateral and the structure to make a sound investment decision. In this article, the authors lay out a framework to list the factors investors should consider when investing in CLO managers. They break down the factors that determine the overall characteristics of a manager into two categories: ones that can be qualitatively investigated and ones that can be analyzed using available track records. The next step is to focus on the consistency, explicability, and repeatability of the manager’s performance. Finally, different investors have different objectives, so investors should have a clear understanding of what types of managers will serve them best.TOPICS: CLOs, CDOs, and other structured credit, portfolio construction