CLOI - Looking Beyond AAA Rated CLOs Pays Off
2024-03-23 03:15:00 ET
Summary
- Investors new to CLOs wary of whether the asset class is too good to be true may choose to constrain themselves to AAAs, but we believe this is misguided.
- We also note that the CLO yields in the chart already assume a decline in short-term rates, as market convention in the asset class is to use the forward interest rate curve.
- The ability to move within the full CLO capital structure can provide attractive total return opportunities as the rate and credit environment shift.
Investors new to CLOs often stick with AAAs, but we argue investors should consider looking at lower rated tranches. ...
Looking Beyond AAA Rated CLOs Pays Off