CLOs

Last week we wrote about a notable shift in market sentiment and how this had impacted our view of relative value within fixed income. So, where has the impact been felt, and has it changed our view on relative value?

It has been two weeks since the primary market for collateralised loan obligations (CLOs) re-opened and 2025 has already proven to be quite a year from multiple angles.

As the fourth quarter of 2024 comes to a close, TwentyFour Asset Management’s Douglas Charleston reflects on the past year’s events and explains why, in his view, the record supply of European ABS and CLOs in 2024 is likely to be matched in 2025.

Last week, members of TwentyFour’s asset-backed securities (ABS) portfolio management team were in Dana Point, California for the Opal Group CLO Summit, an annual event with over 2,000 participants made up of investors, bankers, CLO managers, service providers and lawyers.

With fresh uncertainty surrounding the path for interest rate cuts, we believe the high current income and typically lower volatility offered by European asset-backed securities (ABS) and Collateralised Loan Obligations (CLOs) make them an attractive allocation option for this stage of the cycle.

As the third quarter of 2024 comes to a close, TwentyFour Asset Management's Aza Teeuwen reflects on what this has meant for the Asset-Backed Securities (ABS) team. Not only were volumes across European ABS elevated throughout July and August, we also saw €34 billion in primary issuance – a significant increase from previous years.

Pauline Quirin, Portfolio Management, provides an update on the global Collateralised Loan Obligation (CLO) market, highlighting why we think CLOs are positioned to deliver the strongest performance across fixed income markets for the rest of the year.

The start of the school year ordinarily also marks the end of summer for the primary bond markets as issuance restarts, though this year feels rather different.

Headlines have painted a nervous picture of the health of consumers across Europe. Simultaneously, rating agencies have upgraded their outlook on the same consumer assets to neutral. The short story is that, although there has been a mild weakening in performance metrics, the consumer has held up well and is ahead of our base case expectations in almost all areas.

A consumer loan ABS issued last week by Consors Finanz, a fully-owned subsidiary of BNP Personal Finance, highlights the remarkable appetite investors are currently showing for mezzanine ABS bonds.

Elena Rinaldi, Portfolio Management, wraps up the second quarter of 2024 for the Asset-Backed Securities (ABS) team. She notes that while financial markets experienced mixed performance and broader volatility, the ABS market remained relatively resilient and delivered strong performance.

Having been the best performing asset class across fixed income in 2023, collateralised loan obligations (CLOs) have spent the first half of this year on similar form with record levels of issuance meeting equally strong demand from a broadening range of investors.