Question your assumptions
Valuing CLO paper is complicated, and loan prepayments are one of the trickiest parts. When pricing a new issue CLO, the market generally assumes that 15-20% of loans will prepay their principal annually. This prepayment rate is important because it essentially determines the pace at which a CLO’s rated debt is paid off after the reinvestment period, when the CLO pays down its own principal.

Managers predict skill will win out
We asked managers to predict the year ahead across a range of credit strategies. Overall, they had a positive outlook. By Grace Jennings-Edquist