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Trends with Benefits #82: CLOs: “Too Big to Ignore” with Laila Kollmorgen

August 16, 2022

Listen Time 39:41 MIN

Ed meets with Laila Kollmorgen, Portfolio Manager at PineBridge, to help you understand CLOs and their role in a portfolio.

What is a collateralized loan obligation? And why is allocation to CLOs “too big to ignore”? I meet with fellow Texan, Laila Kollmorgen, Portfolio Manager at PineBridge to unpack what CLOs are and how they compare to other corporate debt categories. We discuss many attractive characteristics of CLOs, such as how their active management has historically helped to mitigate risk, and how their floating rate coupons may protect against rising rates.

Show Notes:

6:45 Collateralized Loan Obligations (CLOs) Explained

8:37 Diversification within CLOs

12:47 Credit Quality of CLOs

14:56 Benefits of Active Management

17:15 Debt vs. Equity Tranches

24:55 Floating Rate Coupons

30:35 CLOs in a Portfolio

33:47 Why CLOs Today

36:30 Long-term Trend

Trend or Fad

Listen for Laila’s take on catastrophe bonds, alternative protein, interval funds, and psychedelic medicine.

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Please note that VanEck may offer investments products that invest in the asset class(es) or industries included in this video.

The views and opinions expressed are those of the speaker and are current as of the video’s posting date, and are not necessarily those of VanEck or its employees. Video commentaries are general in nature and should not be construed as investment advice. References to specific securities and their issuers or sectors are for illustrative purposes only. This is not an offer to buy or sell, or a recommendation to buy or sell any of the securities/financial instruments mentioned herein. The information presented does not involve the rendering of personalized investment, financial, legal, or tax advice. Certain statements contained herein may constitute projections, forecasts and other forward looking statements, which do not reflect actual results, are valid as of the date of this communication and subject to change without notice. Information provided by third party sources are believed to be reliable and have not been independently verified for accuracy or completeness and cannot be guaranteed. VanEck does not guarantee the accuracy of third party data.

An investment in a Collateralized Loan Obligation (CLO) may be subject to risks which include, among others, debt securities, LIBOR Replacement, foreign currency, foreign securities, investment focus, newly-issued securities, extended settlement, management, derivatives, cash transactions, market, operational, trading issues, and non-diversified risks. CLOs may also be subject to liquidity, interest rate, floating rate obligations, credit, call, extension, high yield securities, income, valuation, privately-issued securities, covenant lite loans, default of the underlying asset and CLO manager risks, all of which may adversely affect the value of the investment.

There are inherent risks with fixed income investing. These risks may include interest rate, call, credit, market, inflation, government policy, liquidity, or junk bond. When interest rates rise, bond prices fall. This risk is heightened with investments in longer duration fixed-income securities and during periods when prevailing interest rates are low or negative.

All investing is subject to risk, including the possible loss of the money you invest. As with any investment strategy, there is no guarantee that investment objectives will be met and investors may lose money. Diversification does not ensure a profit or protect against a loss in a declining market. Past performance is no guarantee of future performance.

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