Collateralized Loan Obligations: Seeing beyond the complexity

What is a CLO?

Put simply, a CLO is a portfolio of leveraged loans that is securitized and managed as a fund. Each CLO is structured as a series of tranches that are interest-paying bonds, along with a small portion of equity.

CLOs originated in the late 1980s, similar to other types of securitizations, as a way for banks to package leveraged loans together to provide investors with an investment vehicle with varied degrees of risk and return to best suit their investment objectives. The first vintage of modern CLOs – which focused on generating income via cash flows – was issued starting in the mid-to-late 1990s. Commonly known as “CLO 1.0,” this vintage included some high yield bonds, as well as loans, and were the standard CLO structure until the financial crisis struck in 2008.

Volta Finance Limited (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.

Click to view all articles for the EPIC:
Or click to view the full company profile:
Facebook
Twitter
LinkedIn

More articles like this

Volta Finance

A guide to high-yield fixed income alternatives

When investors think of bonds, their minds immediately go toward U.S. Treasuries or other IOUs issued by corporations. Maybe municipal securities enter their minds. But these are just the tip of the iceberg with regard to

Volta Finance

Record CLO sales boost Wall Street buyout financing

Wall Street bankers looking to raise fresh financing for multi-billion dollar buyouts are getting a boost from the record start to the year from a critical part of the leveraged loan universe. Sales of collateralized loan

Volta Finance

Diversified investment opportunities

For the intrepid investor, there is no shortage of diversified investment opportunities. Interest in cryptocurrencies, structured products, direct indexing, and other “trendy” assets has grown in recent years, but a new report by Morningstar suggests that advisors may need

Volta Finance

The potential of CLO equity

Collateralized loan obligation (CLO) equity has emerged as a source of potentially robust, and front-loaded, returns for sophisticated investors. Over the past 30 years, collateralized loan obligations (CLOs) have grown from a niche asset class into a

Volta Finance

CLO: Best debt investment opportunities for this year

Collateralized loan obligations are among the best debt investment opportunities for this year, according to John Wright, global head of credit at Bain Capital. Spreads on the structured investment vehicles, which repackage leveraged loans into bonds

Volta Finance

US banks reentering $1.3 trillion CLO market

The biggest US banks are stepping back into the $1.3 trillion market for collateralized loan obligations after nearly two years of shying away from investing in the securities. Citigroup Inc. has resumed buying CLOs, according to