Cloud 9fin CLOs are now a family business
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Jun 3, 2025 Yang Xu, CEO at City Hall Capital and seasoned family office expert, shares insights into the growing interest of family offices in Collateralized Loan Obligations (CLOs). He discusses the appeal of CLO equity and mezzanine structures, noting the shift toward more double-B CLO funds. Yang emphasizes the critical need for education among CLO managers to engage family offices effectively. He also highlights the challenges family offices face in selecting managers and the rise of CLO ETFs for retail investors as a creative entry point.
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CLO Equity Basics Explained
- CLO equity operates like equity in a company with loans as assets and debt ahead of equity holders.
- Equity holders get residual cashflows after debt payments, similar to owning stock after debt in a company.
CLOs Offer Strong Risk-Reward
- CLO equity and junior debt have historically performed well even during crises, with low default rates.
- Their risk-reward profile can be superior to corporate bonds, offering attractive returns relative to risk.
Why Family Offices Like CLOs
- CLO equity provides near-immediate distributions, unlike typical illiquid 10-year funds with J-curves.
- CLOs are attractive to families worried about inflation and seeking long-term asset classes with staying power.