Accessing CLOs: Risk, Return and Liquidity Considerations

Fixed Income


Many investors are taking a closer look at collateralized loan obligations (CLOs), an asset class with a 30+ year history and a track record of successfully weathering multiple credit cycles. The equity tranches of CLOs have attracted particular focus, as investors are drawn to the potential to generate double-digit returns while maintaining downside resilience.

In addition, CLO equity stands apart from many traditional credit investments due to its ability to potentially benefit from widening credit spreads. Amid the risk of a potential recession on the horizon — and the greater risk premia demanded by credit investors as a result — this feature has taken on particular importance.

As CLOs attract increased attention, investors are also placing greater focus on different ways of accessing this asset class.

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