Asset managers typically purchase 200+ senior-secured corporate loans to form a CLO.
To fund the purchase of the loans, the manager sells stakes in its CLO to debt and equity investors.
The debt portion of the CLO is organized into multiple levels, known as tranches, that investors can select from. A final equity tranche sits at the bottom.
As loans in the CLO distribute principal and interest, cash flows from the top tranche down on a quarterly basis.
Not until all interest owed to the AAA tranche is paid does AA receive payments, and so on.
We believe the BBB and BB tranches of CLOs have the opportunity to deliver some of the most attractive risk-adjusted returns in fixed income.
The BBB and BB tranches that our Funds target historically offer higher yields than similarly rated corporate bonds and other structured products.
Historically, the CLO structure has proven to be extremely resilient through multiple market cycles.
Wider spreads, a measure of credit risk, allow CLOs to be purchased at a potential discount. As spreads normalize, CLO resale prices are expected to rise.
Yieldstreet offers Funds of BBB and BB CLO tranches.
Each CLO is collateralized by 200+ senior secured loans issued by companies with typically $100M+ of EBITDA.
The BBB and BB tranches have average default rates of 0% and 0.4%, respectively.¹¹
The Funds will only purchase CLOs structured by prominent asset managers such as Blackstone and Goldman Sachs.
We have partnered with Prytania Asset Management as the sub-advisor for our Diversified CLO Funds.
$1T+CLO market globally¹³
20 yrsPrytania years in business
These slides explore the fundamentals of CLOs and how the unique tranche structure helps protect investors.View slides
Mark Hale, CEO and CIO of Prytania, joined Yieldstreet to discuss the benefits of CLOs for investors.Watch video
See how CLOs compare to various fixed income and structured products.Explore the differences
Past performance is not indicative of future performance.
9. Source: Yieldstreet, Prytania Asset Management, JPMorgan, as of 9/30/2023. Data is from the period beginning 12/31/2011. CLOs are represented by the JPMorgan CLO Index, Investment Grade by the JPMorgan US Liquid Index, High Yield by the JPMorgan Domestic High Yield Index and Leveraged Loans by the JPMorgan Leveraged Loan Index.
10. Source: Yieldstreet, Prytania, JPMorgan, as of 9/30/2023. CLO BBB/BB is represented by a custom index of 60% JPMorgan CLO BBB Index and 40% JPMorgan CLO BB Index. CLOs are represented by the JPMorgan CLO Index, Investment Grade by the JPMorgan US Liquid Index, High Yield by the JPMorgan Domestic High Yield Index and Leveraged Loans by the JPMorgan Leveraged Loan Index.
11. Source: S&P Global CLO Spotlight: U.S. CLO Tranche Defaults as of 4/1/2023.
12. Source: Yieldstreet, Prytania Asset Management, JPMorgan, as of 9/30/2023. Data is from the period beginning 12/31/2011. CLO BBB/BB is represented by a custom index of 60% JPMorgan CLO BBB Index and 40% JPMorgan CLO BB Index.
13. Source: JPMorgan. As of Nov 2022.