Grant’s Current Yield Podcast
The ABCs of CLOs
Apr 3, 2024
Guest John Kerschner from Janus Henderson Investors discusses CLOs, company financials, market trends, historical theories, and the securitization process of CLOs including risks, performance during crises, and management strategies. The podcast also compares Janus Henderson's CLO ETFs, explores the leverage loan market dynamics, and highlights the advantages of investing in CLOs for diversified portfolios.
30:44
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Quick takeaways
- CLOs involve corporate debt securitization with diversified loan portfolios for risk mitigation.
- CLO ETFs offer floating rate dividends with varying yields based on risk levels.
Deep dives
Understanding Collateralized Loan Obligations (CLOs)
CLOs, or Collateralized Loan Obligations, are a type of securitization involving corporate debt, not consumer debt. They package leverage loans made to companies that can't borrow in the high yield bond market. CLO managers create portfolios of 200-300 loans, dividing risk into different tranches ranging from AAA to single B. Diversification within CLOs allows for risk mitigation, ensuring even AAA securities have historically never defaulted.
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