What are the benefits of investing in CLOs?

[Music] foreign so some of the benefits to a clo include diversification in the underlying portfolio across Industries and sectors active management on the part of the clo manager potential enhanced yields versus comparable products in the market structural benefits that protect the investors particularly debt investors when there is volatility in the greater market and perhaps defaults in the portfolio Clos are highly structured vehicles and by that I mean that there are not just structured in terms of the debt tranches that are issued but there are generally rules associated with the clo and and tests to make sure that the collateral manager keeps keeps to those rules so for instance one of the tests is an interest coverage test so the the manager is tasked with making sure that the interest collected on the underlying assets is sufficient to pay the debt holders in the clo structure and so the clo is going to act to protect itself when there is an increase in defaults in the portfolio or there's an increase in the downgrades of the underlying loans or the debt tranches and if that happens the structure will work to protect itself by diverting cash flow away from the equity and to the debt tranches starting at the top of the capital structure thank you foreign

Channel: Oaktree Capital

Views: 317

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Id: FEVB5JIAJ7k

Length: 2min 13sec (133 seconds)

Published: Thu Mar 02 2023