Sector developments and company hires

Collateralised loan overlap
Diversification risk across the US CLO market has increased this year, due to the 18% decline in US leveraged loan net supply over 2019 versus 79 different managers issuing deals in 2020. Consequently, JPMorgan CLO research analysts have published a new report looking at US CLO asset inter-overlap (to other managers), intra-overlap (across portfolios of the same manager) and vintage overlap.

“Overlap in the context of the US CLO market doesn’t seem egregious, averaging 24% across managers, but ranging 7% to 70% depending on 6,700-plus combinations of 117 managers we sampled in our engine,” the JPMorgan analysts note. “Meanwhile, intra-overlap tends to be higher than inter-overlap, averaging 74% - though again, wide ranging (40% to 92%). Overlap can be higher for loan portfolios in a given vintage and, at least in our historical example of the 2015 vintage, tends to increase over time.”

However, the analysts add: “Overlap is a useful but incomplete risk measure and CLO investors should also consider credit quality, issuers/sectors affected by the pandemic, manager strategies etc.”

Manager transfer
Dock Street Capital Management has replaced Collineo Asset Management as collateral manager to the House of Europe Funding IV ABS CDO. Under the terms of the appointment, Dock Street agrees to assume all duties and obligations under the collateral management agreement and other transaction documents. Moody’s confirms that the move will not impact any of its ratings on the notes. For more CDO manager transfers, see SCI’s database.