WHAT IS HAPPENING WITH AAA CLOs? In this Reflections we explore the reliance of the CLO market on Japanese investors, the underperformance of CLO AAAs compared to other credit products during 2019 year-to-date and recent moves towards a more granular and diverse AAA investor base. CLO MARKET RELIANCE ON JAPANESE BANKS We have often highlighted […]
Managing credit risk and avoiding credit losses are key drivers of CLO returns. A strong focus on potential sources of credit risk is essential when considering investments at this point in the credit cycle. Contrary to general expectations of widespread defaults, Fair Oaks Capital believes that corporate default losses over the next five years will […]
While responsible investing is increasingly gaining traction among investors and asset managers, the CLO market has been slow to embrace it. In this note we explore the reasons for this and the steps that some CLO managers are taking to become more responsible investors. BACKGROUND Responsible investing is the incorporation of ESG (Environmental, Social, Governance) […]
Much has been written over the last two years on the prevalence of “cov-lite” loans and, more recently, on other weaknesses in loan documentation. Below are what we believe to be the key points for investors considering exposure to the loan market. SUMMARY Senior secured lenders have lost some of their control over borrowers through […]
US bank loans suffered significant losses in November and December 2018 as a result of changes in interest rate expectations and outflows from ETFs and open-ended loan funds (please see our December issue of Reflections). European loans and US and European CLO spreads widened in sympathy, despite limited trading flows and the lack of negative […]
A combination of negative credit headlines and a change in investor expectations regarding future US interest rates has resulted in a significant increase in volatility in the US loan market in what traditionally are slow weeks around the Thanksgiving holidays and pre-Christmas period. While the US loan market does not appear to have suffered the […]
Kudu Investment Management, LLC (“Kudu”), a provider of capital solutions to the asset management and wealth management industries, today announced that it has agreed to take a passive minority stake in leading London-based alternative credit manager Fair Oaks Capital Ltd., and various affiliates (“Fair Oaks”). Please click here to view the press release.
On 2 October 2018, Fair Oaks hosted its annual investor event in London to review the performance of corporate credit and CLO markets in 2018 and the opportunities and challenges 2019 may present. In addition to presentations by portfolio managers from both our London and New York offices, we were fortunate to have Mr. Lee […]