KBRA UK (KBRA) releases a report that examines the different strategies adopted by collateralised loan obligation (CLO) managers. This report is an update to our previous analysis released in June.

CLO managers are often evaluated on a tiering of their portfolio based on various metrics. But this evaluation method can sometimes produce counterintuitive results and does not always consider a manager’s style and objectives. For example, should CLO managers be penalised for pursuing a more opportunistic strategy that produces a high weighted average spread, or viewed favourably if their portfolios are managed according to their objectives? In this report, we examine cross-metric comparisons that could offer insight on potential strategies employed across the market.

Key Takeaways

• KBRA’s cross-metric comparisons reveal a range of potential CLO manager styles. Using various pairings of CLO performance metrics, a particular CLO manager platform can be assessed on where it may fall on the spectrum of conservative versus opportunistic approaches to portfolio management.
• Managerial styles can vary from very opportunistic (with a large majority of cross-metric comparisons indicating an opportunistic approach) to the more conservative (with some managers having as many as eight cross-metric comparisons falling below the market average). Current market dynamics have led to numerous and large swings in manager movements, from opportunistic to conservative and vice versa, since our June analysis.
• The report’s individual top 10 metric tables detail CLO manager performance, as well as manager migration since the previous report.

Click here to view the report.

Related Publications

• Structured Credit Global Rating Methodology
• European CLO Manager Style Comparisons

About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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