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Investigating the Trading Activity of CLO Portfolio Managers

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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.

Suggested Citation

  • Stavros Peristiani & João A. C. Santos, 2015. "Investigating the Trading Activity of CLO Portfolio Managers," Liberty Street Economics 20150803, Federal Reserve Bank of New York.
    • Handle: RePEc:fip:fednls:87049
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    Cited by:

    1. Zahn Bozanic & Maria Loumioti & Florin P. Vasvari, 2018. "Corporate Loan Securitization and the Standardization of Financial Covenants," Journal of Accounting Research, Wiley Blackwell, vol. 56(1), pages 45-83, March.

    More about this item

    Keywords

    turnover ratio; leveraged loans; Structured finance;
    All these keywords.

    JEL classification:

    • G2 - Financial Economics - - Financial Institutions and Services
    • G1 - Financial Economics - - General Financial Markets

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