Collateralized Loan Obligations: A securitized products primer
Portfolio Managers John Kerschner, Nick Childs, and Jessica Shill discuss how collateralized loan obligations (CLOs) are created, their key characteristics, and what they might offer investors.
11 minute read
Key takeaways:
- While CLOs have been a part of the securitized products market for more than 30 years, their availability to a wider range of investors is a more recent development.
- At around $1 trillion in assets, the U.S. CLO market is large, liquid, and fast approaching the $1.3 trillion high-yield market in terms of size.
- With their high credit ratings, floating rate coupons, attractive yields, and diversification benefits, we believe an allocation to CLOs may be a key strategic holding within a diversified portfolio.
CLOs are managed portfolios of bank loans that have been securitized into new instruments of varying credit ratings. They have increasingly become the link between the financing needs of smaller companies and investors seeking higher yields.
CLOs have been a part of the U.S. securitized products market since the late 1980s. Historically, most CLOs were privately sold to large institutional investors such as banks, insurance companies, and asset management companies. But as the market has grown, CLOs have become more broadly accessible to retail investors.
Download PDFJHI
JHI
Related insights
All opinions and estimates in this information are subject to change without notice and are the views of the author at the time of publication. Janus Henderson is not under any obligation to update this information to the extent that it is or becomes out of date or incorrect. The information herein shall not in any way constitute advice or an invitation to invest. It is solely for information purposes and subject to change without notice. This information does not purport to be a comprehensive statement or description of any markets or securities referred to within. Any references to individual securities do not constitute a securities recommendation. Past performance is not indicative of future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.
Whilst Janus Henderson believe that the information is correct at the date of publication, no warranty or representation is given to this effect and no responsibility can be accepted by Janus Henderson to any end users for any action taken on the basis of this information.
11 minute read
Key takeaways:
- While CLOs have been a part of the securitized products market for more than 30 years, their availability to a wider range of investors is a more recent development.
- At around $1 trillion in assets, the U.S. CLO market is large, liquid, and fast approaching the $1.3 trillion high-yield market in terms of size.
- With their high credit ratings, floating rate coupons, attractive yields, and diversification benefits, we believe an allocation to CLOs may be a key strategic holding within a diversified portfolio.