Working Paper: Active Loan Trading

Working Paper - June 2018 - No. 127

Authors Mølgaard, Pia
Subject Financial markets; Instruments
Type Working paper
Year 2018
Published 19 June 2018
Abstract icon The collateralized loan obligation, CLO, market withstood the recent financial crisis with minimal losses compared to other structured asset-backed securities. We investigate one unique aspect of CLOs – that the CLO manager actively maintains the collateral pool by selling and purchasing loans. We find that more active CLOs trade at better prices, provide higher returns to equity investors, and maintain lower collateral portfolio default rates than less active CLOs.