What’s the right size for a CLO manager? - managers can’t agree

By Mike Peterson

Wednesday, May 30, 2012

One hot topic discussed at the Creditflux CLO Symposium this month was what is the right size for a CLO or credit manager

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Comment by: Anonymous. Posted 11 years ago [2012-05-30 12:47:49]

Liquidity as in most asset classes seems to be the key. The further you go down the liquidity spectrum, the more constraining it is for the bulge bracket firms in below investment grade corporate credit. Factors offsetting this premise would include an ability to source differentiated loans and also the type of vehicle holding the asets. The beauty of CLOs is the long term non recourse financing which has helped CLOs withstand the test of time in periods where liquidity dries up and credit stress rises. Final thoughts - investors are probably a better judge of "right size" in CLOs rather than managers who are conflicted by AUM growth drivers - and in the more credit risky sectors like below investment grade corporate credit, history seems to show that relative outperformance seems to be linked to what and when you sell rather than what you buy.

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