Food, drink and tobacco will tempt CLO managers, says JP Morgan

Food, drink, tobacco and utilities are likely to be among the most popular sectors from which CLO managers will buy loans, according to JP Morgan's High Yield Credit Weekly report. The bank analysed existing CLO portfolios to find sectors in which the concentration of assets is low. Other sectors that are under-represented in the current CLO universe include hotels and gaming, containers and packaging. However, as the report points out, managers may well choose to avoid these highly cyclical sectors.

Managers will probably continue to source assets mainly in the primary market, the report notes, attracted by the Libor floors and pricing discounts available in this market.