Investigating the Trading Activity of CLO Portfolio Managers

Stavros Peristiani () and Joao Santos

No 20150803, Liberty Street Economics from Federal Reserve Bank of New York

Abstract: Unlike mortgage-backed and home equity-backed securities, collateralized loan obligations (CLOs), whose collateral is predominantly corporate loans, are slowly but steadily recovering. This revival, illustrated in the chart below, spotlights again a sector of nonagency structured finance that has been scrutinized for its investment practices. This post investigates the trading activities of CLO collateral managers. Understanding their investment strategies is crucial to assessing their effectiveness as financial intermediaries, including their role in financing leveraged buyouts, corporate recapitalizations, project finance, and their impact on bank loan underwriting standards. It is also relevant to the recent debate concerning the potential perils of the reemergence of CLOs.

Keywords: turnover ratio; leveraged loans; Structured finance (search for similar items in EconPapers)
JEL-codes: G1 G2 (search for similar items in EconPapers)
Date: 2015-08-03
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