What is a CLO?

  • A CLO is a financing tool that allows an investor to take a leveraged exposure to an actively managed loan portfolio
  • The performance of a CLO is driven by the cash performance of the underlying assets – i.e. default and loss (and not mark to market changes) in the loan portfolio impact CLO cash flows
  • The debt (or liabilities) issued by a CLO are long term (typically 10-12 years) and in particular are longer than the maturity of the underlying loans
  • CLO equity benefits from the leverage provided by large institutional fixed income investors in the form of term, non-recourse, rated debt
  • The CLO structure has proved to be an efficient tool for investors to take exposure to the loan market.
  • 3i Debt Management has a track record of managing CLOs through market cycles in the US and Europe.