@article {Ozbalci57, author = {Saffet Ozbalci}, title = {A New World for CLO Equity Investors}, volume = {19}, number = {3}, pages = {57--61}, year = {2013}, doi = {10.3905/jsf.2013.19.3.057}, publisher = {Institutional Investor Journals Umbrella}, abstract = {Collateralized loan obligation (CLO) equity has been a great investment (with high cash-on-cash return and stable- to-higher prices) in the past few years. Almost any CLO equity investment (irrespective of the structure and manager) has delivered a strong return driven by a benign default environment, low rates, and an attractive asset{\textendash}liability spread. Since the beginning of 2013, however, tighter loan spreads and widening out of liabilities has made the equity arbitrage very challenging, resulting in a much lower total return for equities from recent vintages. CLO equity should always be considered as a part of an efficient portfolio, given its attractive return profile and low correlation with other asset classes. In today{\textquoteright}s market, however, investing in CLO equity based on buy-to-hold strategies no longer works and will significantly underperform an actively managed non-investment-grade CLO portfolio. The ideal solution is to have an actively managed portfolio that also includes junior parts of the capital structure.TOPICS: CLOs, CDOs, and other structured credit, portfolio construction}, issn = {1551-9783}, URL = {https://jsf.pm-research.com/content/19/3/57}, eprint = {https://jsf.pm-research.com/content/19/3/57.full.pdf}, journal = {The Journal of Structured Finance} }