Sector developments and company hires

Euro CLO equity yields dip
Annualised equity dividend yields across European CLOs averaged 12.9% in 2020, down from 15.1% in 2019 and below the 15% yearly average for the 2014-2020 2.0 era, according to research from Bank of America. However, the research suggests that in light of the pandemic disruption, the dip was moderate and mainly driven by a drop in Q2/Q3 payments amid collateral trading losses and some equity cashflow diversions (either forced by OC/ID test breaches or by discretionary decisions of CLO managers).

The BofA CLO analysts note: “We observe significant variability across deals, with the vast majority of equity notes receiving annualised yields between 4% and 20%, depending on quarter, deal and vintage. 2017/2018 cohorts continued to perform better, thanks to the lowest coupon levels ever printed for European CLO 2.0. Equity NAVs have improved back to nearly pre-pandemic levels after they turned negative in March 2020, but dispersion still remains somewhat scattered and is expected to persist.”

In other news…

APAC
Jennifer Law has joined Aon’s Asia Pacific capital advisory unit within its reinsurance solutions business. Reporting to Rupert Moore, ceo of Japan for reinsurance solutions, Law will work with insurance company clients across Asia Pacific on strategies aimed at improving their capital through the utilisation of Aon’s products and services, as well as customised reinsurance programmes. She was previously md of global non-bank financials equity research at Haitong International Research in Hong Kong, with a primary focus on insurance companies in Greater China.

Auto SRT notes upgraded
Moody's has upgraded the ratings of two CLNs and three credit protection deed tranches of Santander’s UK synthetic auto securitisation Motor Securities 2018-1, reflecting increased levels of credit enhancement for the affected notes. The agency notes that total delinquencies with 90 days plus arrears currently stand at 0.50% of current pool balance, while cumulative final losses currently stand at 0.11% of original pool balance. The current default probability is 3.25% of the current portfolio balance, the fixed recovery rate is 40% and the portfolio credit enhancement is 12%.

Sequential amortisation led to the increase in available credit enhancement. For instance, the credit enhancement for the most senior tranche affected by the rating action – the class B tranche - increased to 14.11% from 9% since closing.

North America
Loomis Sayles has promoted Kyra Fecteau to portfolio manager for securitised credit strategies managed by its mortgage and structured finance (MSF) team, which helps oversee US$30.4bn in securitised investments across both dedicated mandates and as part of broader investment strategies. Fecteau co-manages the Loomis Sayles Investment Grade Securitised Credit strategy with Alessandro Pagani, head of the MSF team.

Fecteau also co-manages the Loomis Sayles High Yield Securitised Credit strategy, alongside Pagani and Stephen L’Heureux. She remains an investment strategist for securitised credit.