Bloomberg Anywhere Login

Bloomberg

Connecting decision makers to a dynamic network of information, people and ideas, Bloomberg quickly and accurately delivers business and financial information, news and insight around the world.

Company

Financial Products

Enterprise Products

Media

Customer Support

  • Americas

    +1 212 318 2000

  • Europe, Middle East, & Africa

    +44 20 7330 7500

  • Asia Pacific

    +65 6212 1000

Communications

Industry Products

Media Services

Follow Us

BlueMountain Sees ‘Mid-Teens’ Returns in Riskiest Slice of CLOs

Dec. 5 (Bloomberg) -- BlueMountain Capital Management LLC predicts returns in “the mid-teens” from the riskiest pieces of junk-loan pools at a time when corporate bonds are paying record-low yields.

“We still like CLO equity,” Stephen Siderow, BlueMountain’s president, said at the Bloomberg Hedge Fund Summit in New York today, referring to the portions of collateralized loan obligations that are the first to absorb losses. “We like it because we like the loan asset class relative to unsecured bonds.”

CLOs pool together high-yield, high-risk loans and slice them into securities of varying risk and return. Leveraged loans have gained 9.7 percent this year, according to the Standard & Poor’s/LSTA U.S. Leveraged Loan index.

Yields on high-yield bonds dropped to a low of 6.8 percent on Oct. 18, according to Bank of America Merrill Lynch index data, as the Federal Reserve’s stimulus measures push investors into lower-rated debt. The gap between yields on the bonds and loans, which are usually paid first in a bankruptcy, has fallen to less than half its historic average, according to JPMorgan Chase & Co. data.

To contact the reporters on this story: Lisa Abramowicz in New York at labramowicz@bloomberg.net; Nathaniel Baker in New York at nbaker14@bloomberg.net

To contact the editor responsible for this story: Alan Goldstein at agoldstein5@bloomberg.net

Please upgrade your Browser

Your browser is out-of-date. Please download one of these excellent browsers:

Chrome, Firefox, Safari, Opera or Internet Explorer.