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CLOs have found broadening appeal with institutional investors this year, and are set to expand their reach into crossover products beyond the classic BSL and relatively newer middle-market models, according to panelists at a conference last week in New York. 

Opal’s Celebrating Women in Structured Finance Summit, hosted by Cadwalader at its Manhattan office on 16 September, was well-attended this year by a variety of female decision-makers in the markets. Attendees compared notes on appetite for different structured products, in between a trio of panels that touched on CLOs, ABS, and capital call securitization, in that order. 

CLOs in particular shone bright, being highlighted in both the CLO and ABS panels. Growing curiosity about the asset class was evidenced in a question during the CLO panel, when the audience Q&A portion began.

A wealth management advisor asked the panelists how CLO managers conducted analysis at the issuer level, and assessed issuers within each industry. “Tell me about the micro aspect of CLOs,” the advisor said. “We know about the macro environment, but what are you looking at in companies' balance sheets?”

A CLO manager on the panel replied, supplying a laundry list of risk factors assessed in the initial underwrite, from competitive positioning and industry prospects to pricing power, cost structure, and revenue drivers, while emphasizing the role of active management in sticking with the credits over time. “You have to constantly be monitoring that and updating your view,” the manager said.