Press Release|Structured Credit

KBRA Releases Research – European CLO Manager Style Comparisons: April 2024 Update

29 Apr 2024   |   London


KBRA releases a report that examines the different strategies adopted by collateralised loan obligation (CLO) managers.

An individual CLO manager’s style or approach to investing in a pool of leveraged loans can vary compared to peers. In the end, it is investors who determine which manager’s approach best suits their needs. As part of KBRA’s series examining European CLO manager styles, this report examines cross-metric comparisons that could offer insight on potential strategies employed across the market. In this report, an update to our October 2023 analysis, we continue to focus on some of the differences between CLO managers when evaluated across different cross-metric comparisons and highlight changes since our prior publication. The governing classifications used in this report are Opportunistic and Conservative; however, these classifications are not intended to imply any positive or negative sentiment. Rather, they are being utilised for information purposes to display and distribute the data.

Key Takeaways

  • Turnover among manager rankings has increased over the past six months. This is partly due to the dynamic economic climate with interest rates changing, defaults increasing, collateral downgrades, and the increasing number of amortising transactions, as highlighted in our recent research report (see Navigating European CLO Tail Risk: Mind the Amortisation Gap).
  • Half of the most opportunistic managers have changed. The new entrants into the top 10 most opportunistic are King Street, Fidelity, Voya, Alcentra, and Bridgepoint. Notably, King Street and Alcentra previously had much more conservative rankings. Alcentra was previously among the most conservative managers and has seen an increase in several metrics including weighted average spread (WAS), KBRA weighted average rating factor (K-WARF), and equity yields impacting its cross-metric comparisons.
  • There remains a core group of conservatively leaning managers, although shrinking, with only three managers from the October 2023 report, one of which—Redding Ridge AM—remains in the top 10 since June 2022. One of the seven new market entrants—MV Credit—leans conservative and starts out among the 10 most conservative managers. The most steadily conservative managers include Redding Ridge, CQS, and Ostrum. The managers that have made the biggest change are KKR and Credit Suisse AM, both migrating from the moderately opportunistic quartile to the most conservative.
  • In a reversion from our October report, conservative managers have become more convincingly conservative, while the more opportunistic managers have become less convincingly opportunistic. Of the top 10 opportunistic managers, two have six cross-metric comparisons firmly in the opportunistic quadrant, down from four such managers in the prior report. In comparison, five of the top 10 conservative managers have six or more cross-metric comparisons in the conservative quadrant, three of which have eight in this quadrant. This is up from four managers with six or more and only one with eight in the conservative quadrant in our October report.

Click here to view the report.

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About KBRA

KBRA is a full-service credit rating agency registered in the U.S., the EU, and the UK, and is designated to provide structured finance ratings in Canada. KBRA’s ratings can be used by investors for regulatory capital purposes in multiple jurisdictions.

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