CLO fund performance came under pressure in Q1 2025, as macro uncertainty weighed on returns. The year began with a constructive technical backdrop and healthy primary issuance (Q1 25 European leveraged loan volumes surged to ~€100bn across 131 deals, about half of 2024’s ~€200bn record first quarter issuance and the highest annual level since 2020), but returns told a more subdued story by the end of the quarter.

As the quarter wore on, macro headlines impacted CLO liabilities, which began to widen across the capital structure. European double-B CLOs were particularly affected, sources say, with spreads widening from around E+475bps to E+600bps by the end of March (with further widening to come.)