Edwin Wilches, PGIM’s Co-Head of Securitized Products, details the history of collateralized loan obligations (CLOs), explains CLO market mechanics, and outlines the strategic case for allocating to AAA-rated CLOs as investor access expands beyond the institutional remit. With attributes including stable income, strong structural protections, and low correlations to traditional bonds, Wilches shares why he believes AAA CLOs might just offer one of the most compelling risk-return profiles in fixed income today.
Key questions addressed:
- How do AAA CLO yields compare with similarly rated corporate bonds?
- What do historical default trends tell us about risk?
- Why prioritize the highest-quality CLO tranches?
- What role can CLOs play in diversifying a traditional wealth portfolio?
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The Growing Appeal of CLOsCollateralised Loan Obligations (CLOs) represent a rapidly expanding market, offering distinct opportunities within the fixed income landscape. Their impressive growth has been fuelled by attractive yields, strong performance, diversification benefits, and effective mitigation of interest rate and credit risks.
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AAA CLOs: Compelling Income in a Volatile WorldPGIM’s Edwin Wilches, CFA, Gabriel Rivera and Connor Byrnes share how investors may enhance risk-adjusted return potential through AAA CLOs.
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The Risk-Adjusted Promise of AAA CLOsAttractive income and a default-free track record make the highest-quality CLOs a compelling choice for investors seeking income-driven returns.
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