Cloud 9fin Tranche Talk — CLO investing in a new regime with BlackRock’s Saffet Ozbalci
Oct 14, 2025
Saffet Ozbalci, Global Head of Structured Credit at BlackRock, shares insights on CLO investing amid recent bankruptcies and market shifts. He emphasizes the need for due diligence on managers and discusses the evolving landscape of CLO ETFs, highlighting their growth and retail appeal. Ozbalci explores the challenges of structural innovation and the importance of standardizing documentation to enhance efficiency. He also addresses the impact of monetary policy on ETF flows and playfully reflects on his favorite football team's prospects in the Champions League.
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Assess Managers By Process Not One Event
- BlackRock evaluates CLO managers by process, execution ability, team and resources rather than a single LMEs mistake.
- Saffet emphasises digging into deal nuances because two similar default profiles can perform very differently based on equity decisions.
Choose CLOs For Relative Value
- Use CLOs as a relative-value decision versus other asset classes, not merely to express rate views.
- Focus on AAA for relative value and be selective lower in the stack given tight spreads and investor constraints.
Favor Senior AAA For Liquidity
- Prefer senior AAA for liquidity-sensitive investors because junior AAA's extra spread rarely compensates for reduced liquidity.
- Use junior AAA only with locked-up capital seeking incremental yield and able to bear illiquidity.