Cloud 9fin More tailwinds than headwinds for CLOs in 2025
32 snips
Dec 18, 2024 Pratik Gupta, Head of CLO and RMBS research at Bank of America, shares insights on the thriving CLO market. He highlights the record-breaking performance of CLO BBs and AAA markets, with returns soaring since 2022. Gupta discusses the rising appeal of AAA CLOs among investors, strategic shifts by U.S. banks, and the influence of Japanese buyers. He also delves into the complexities of Loan Market Exchange structures and how CLO managers can navigate the evolving landscape of 2025. Expect more growth and strategic depth ahead!
AI Snips
Chapters
Transcript
Episode notes
Record CLO Issuance in 2024
- CLOs had record-breaking issuance in 2024, reaching nearly $190 billion.
- Private credit CLO issuance also hit a record high of $40 billion.
CLO Performance Exceeds Expectations
- CLO BBs returned 40% since January 2022, outperforming the S&P 500 by 15 points.
- CLO AAAs returned close to 17%, marking double-digit returns for a fixed-income product.
Attractive Yields in CLO BBs
- Both CLO AAAs and BBs are expected to outperform, especially BBs due to their double-digit yields.
- CLO BB yields are comparable to the riskiest high-yield bonds, despite historically lower impairment rates.