Mark Shohet, BlueBay Portfolio Manager, U.S. Fixed Income at RBC Global Asset Management, joined Chris Martin, CFA, Institutional Portfolio Manager, Alternative Strategies at RBC Global Asset Management, to discuss the value of exposure to collateralized loan obligations (CLOs) in portfolio construction.
As the CLO market has grown to approximately $1.5 trillion, Shohet highlights the range of opportunities CLOs can offer investors. He explains that each rated tranche within a CLO’s capital structure provides varying levels of credit enhancement and spread, allowing investors to select their preferred risk-return profile. Additionally, CLOs offer diversification across hundreds of underlying loans, which can help mitigate single-name credit risk and reduce exposure to concentrated sectors, including AI.
Shohet also emphasizes the importance of active management and manager selection. Unlike many securitized products with static portfolios, CLO portfolios are actively managed. Therefore, RBC prioritizes experienced managers with meaningful capital at stake, as portfolios from the same vintage can differ significantly after just one to two years.
Lastly, Shohet highlights RBC BlueBay’s dedicated CLO management platform and centrally managed U.S. and European teams, which help provide a consistent investment approach across regions. As part of the broader BlueBay platform, the team can leverage insights from macro, high-yield, emerging markets, and other credit specialists to inform investment decisions. For example, monitoring developments in the high-yield market can help the team identify trends before they spill over into loans and CLOs.
WEBCAST – From niche to mainstream: The case for CLO exposure
Once a niche corner of the credit market, CLOs have moved to the center of the leveraged loan ecosystem, and the case for strategic exposure has never been more compelling. In this webcast, RBC will walk through how the CLO market has matured, why current valuations in CLO equity may offer an attractive risk-reward setup, and how an adaptive, flexible approach can help investors capture the full potential of a CLO portfolio, specifically:
- The CLO market has matured: understanding CLOs and how they became essential to the leveraged loan ecosystem
- Timing matters for CLO equity: current valuations may offer attractive risk-reward opportunities
- Flexibility is critical: how RBC GAM’s adaptive strategy maximizes CLO portfolio potential
Sponsors of this webcast may contact registrants. This webcast is for financial professionals only.
Accepted for 1 CFP / IWI / CFA CE Credit
Resources:
RBC BlueBay Enhanced Income Fund
Challenged arbitrage and barbells in CLOs
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