CLO managers have bought more than $600 million of CLOs, says Citi

Alcentra has been the biggest buyer of CLO tranches to add to its own CLOs, according to research by Citi. The bank notes that CLO tranches can be an appealing investment for CLOs since they typically provide a higher yield than corporate assets. (Presumably, they also offer good scope for par-building). The bank calculates that CLOs’ holdings of other CLOs has grown from $3.65 billion at the beginning of 2009 to $4.3 billion now.

Other manages that have seized the opportunity to buy CLOs include Apidos, Angelo Gordon, Babson Capital and Black Diamond. While some managers, such as Black Diamond, have bought exclusively triple A tranches, others have dived down the capital structure. The biggest buyers of original triple Bs and double Bs, for example, have been Babson Capital and Invesco.

Citi notes that CLOs can typically invest around 5% of their portfolio in CLOs, and speculates that some managers who have failed to do so may be sleeping at the wheel.