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CLO Monthly Monitor
While September was in-line with the year-to-date average CLO origination of $9.6 billion, issuance for the third quarter finished higher at $28 billion compared to $22 billion in the second quarter.
CLO tranches had positive total returns in September. JP Morgan estimated returns for September were 0.56% (AAA), 0.70% (AA), 0.72% (A), 0.67% (BBB), 0.76% (BB), and 1.25% (B). The Credit Suisse Leveraged Loan Index returned 0.88% in September. An improved CLO equity arbitrage enabled aging warehouses to offer sufficient returns to investors, making the primary market more accessible for mid-sized and smaller managers. While September was in-line with the year-to-date average CLO origination of $9.6 billion, issuance for the third quarter finished higher at $28 billion, compared to $22 billion in the second quarter. Retail fund inflows were just over $1 billion in September, which brought inflows for the quarter into positive territory for the first time since the first quarter of 2022. The combination of the directional shift in retail fund flows, along with elevated CLO origination, led to a significant increase in total demand for leveraged loans in the third quarter.