The case for CLOs
1 minute read
Key takeaways:
- CLOs offer portfolios of floating-rate bank loans securitised across the rating spectrum. The availability of floating-rate bonds is limited in the US, and the choices for high-quality
floating-rate securities are even more limited, yet around 75% of CLOs carry a credit rating from A to AAA. - Relative to the investment-grade corporate credit market, CLOs have offered a consistent yield premium across the rating spectrum, in some cases as much as two times the yield offered over US Treasuries.
- In an environment where interest rates are rising, allocations to CLOs may help investors diversify a traditional fixed income portfolio, offering lower volatility, higher credit-quality and less sensitivity to any rise in interest rates.
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1 minute read
- CLOs offer portfolios of floating-rate bank loans securitised across the rating spectrum. The availability of floating-rate bonds is limited in the US, and the choices for high-quality
floating-rate securities are even more limited, yet around 75% of CLOs carry a credit rating from A to AAA. - Relative to the investment-grade corporate credit market, CLOs have offered a consistent yield premium across the rating spectrum, in some cases as much as two times the yield offered over US Treasuries.
- In an environment where interest rates are rising, allocations to CLOs may help investors diversify a traditional fixed income portfolio, offering lower volatility, higher credit-quality and less sensitivity to any rise in interest rates.