CLOs Increased Low-Quality Loan Holdings in a Reach for Yield
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Collateralized loan obligations, the biggest buyers of U.S. leveraged loans, have built up exposure to low-quality deals over the past two years, according to Barclays Plc.
Their ownership of low-grade debt has risen to 4.3 percent of holdings from more than 2 percent in September 2013, according to a Barclays research note Friday. CLO managers have sought to boost returns with risky, CCC rated loans after regulation implemented under the 2010 Dodd-Frank Act prevented them from holding high-yield bonds.