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Forward Guidance
Structured Credit Maven Laila Kollmorgen on CLO’s Rally and Opportunity To Differentiate As Fundamentals Soften and Prices Climb | VanEck Fireside Chat #6
Sep 11, 2024
01:21:24
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Laila Kollmorgen, a Portfolio Manager specializing in CLO Tranche at Pinebridge Investments, shares insights on the booming market for collateralized loan obligations (CLOs). She discusses their appealing structure and how they outperformed during recent market turmoil. The conversation delves into the selective investment opportunities arising as credit fundamentals soften and prices rise. Laila also compares CLOs to CDOs, emphasizing their resilience in the face of past financial crises and the critical factors in making informed investment decisions.
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Quick takeaways
- CLOs have outperformed other fixed-income assets over the past 11 years due to their floating-rate structure, which reduces duration risk.
- The distinction between CLOs and CDOs highlights CLOs' superior stability and risk management, especially during economic downturns.
Deep dives
Introduction to Collateralized Loan Obligations
Collateralized loan obligations (CLOs) play a significant role in financial markets by helping banks manage their balance sheets more effectively. They emerge from the historical evolution of securitization, where banks initially sought to offload risky loans and enhance liquidity for further lending. The underlying assets in CLOs consist primarily of corporate loans, which are viewed as first-priority debt, offering higher recovery rates during bankruptcies, typically ranging from 60% to 70%. This structure allows investors to benefit from an efficient method of financing corporations while mitigating risk through diversified loan holdings.
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