John Kerschner of JanusHenderson - CLOs: What Are They and Why Should Investors and Financial Advisors Be Interested?

Nov 5, 2024

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Today, Rusty and Robyn are joined by John Kerschner, Head of US Securitized Products and a portfolio manager at Janus Henderson Investors. He is a member of the Securitized Credit and US Fixed Income Teams and leads the teams in finding innovative ways to utilize structured products in JHI portfolios. Prior to joining Janus in 2010, John was director of portfolio management at BBW Capital Advisors. Before that, he worked for Woodbourne Investment Management, where he was global head of credit investing. John began his career at Smith Breeden Associates as an assistant portfolio manager and was promoted several times over 12 years, becoming a principal, senior portfolio manager and director of the ABS-CDO group. John received his bachelor of arts degree in biology from Yale University, graduating cum laude. He earned his MBA from Duke University, Fuqua School of Business, where he was designated a Fuqua Scholar. John holds the Chartered Financial Analyst designation and has 34 years of financial industry experience.

Key Takeaways

[02:07] - Learn more about John’s professional background and his work at JanusHenderson.
[05:07] - Does John think it will be a gradual path to lower interest rates or might the economy derail those plans for The Federal Reserve?
[08:45] - How does John explain what the neutral rate is and does he care about it professionally? If so, does he think the market is getting the neutral rate right?
[11:57] - How would John explain securitized debt to his family and friends?
[15:08] - How would John compare and contrast CLOs with securitized debt?
[17:14] - An update on the current health of the consumer.
[21:12] - Why are yields and spreads still so attractive in the securitized space and how does John view the credit landscape moving forward?
[25:32] - What roles do CLOs play when The Federal Reserve starts cutting rates?
[28:14] - Has there been a change in the types of CLOs being issued?
[31:05] - What is the outlook on mortgage backed securities right now?
[35:40] - What opportunities does John see in Asset Backed Securities (ABSs) and how do these contrast with other securitized products?
[39:14] - Does John think we will see a bounce back in Commercial Mortage Backed Securities (CMBSs) or not?
[48:32] - What is currently John’s favorite investment idea?

Quotes

[14:28] - “The beauty of securitization is that you’re taking an individual loan: auto loan, credit card loan, student loan, mortgage loan, you name it, and you’re packaging that loan with many other loans and taking those cash flows and selling them to investors like us at JanusHenderson. ~ John Kerschner

[15:09] - “Yeah, so CLOs, it’s an acronym…[that] stands for collateralized loan obligations…All it is, it’s the same idea [as securitized debt], but you’re using corporate loans instead of consumer loans.” ~ John Kerschner

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Disclosure(s) - Orion Portfolio Solutions, LLC, an Orion Company, is a registered investment advisor.

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