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Structured Credit Maven Laila Kollmorgen on CLO’s Rally and Opportunity To Differentiate As Fundamentals Soften and Prices Climb | VanEck Fireside Chat #6

Forward Guidance

NOTE

Avoid Red Flags: CLO Investment Insights

When selecting Collateralized Loan Obligations (CLOs) for investment, avoid those with inexperienced managers or poor track records across credit cycles, as this indicates inadequate risk management strategies. It is crucial to assess the manager’s response to adverse situations, portfolio construction, and security selection. Pay attention to the liquidity of the portfolio; a high percentage of illiquid assets can signal potential issues. Additionally, be cautious of overly aggressive portfolios aiming for high equity tranche distributions, particularly in volatile market environments. Even if comfortable with certain asset classes, like double Bs, portfolio construction must align with both the current market conditions and predicted future trends. Consistent monitoring of portfolio underwriting practices further aids in identifying suitable investment opportunities.

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