US CLO portfolio quality in decline since winter selloff, says Wells

Winter clock
By Alexander Saeedy
17 May 2019

A team of researchers at Wells Fargo led by David Preston said in a webcast on Friday that managed CLO portfolios saw a decline in quality as managers in aggregate failed to build par and bought lower credit quality loans.

While periods of distress offer opportunities for CLO managers to build par, or buy loans at a discount and create value by growing the overall size of the fund’s loan book. Increasing AUM effectively provides more credit support for existing CLO tranches, and tranches can thus withstand higher ...

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