Life as a CLO Analyst + Career Progression

Can anyone provide some information on the "day in the life" of a High Yield CLO Analyst, particularly for a more junior investment professional (2-5 years exp). Looking to learn more about the underwriting process, detail on credit memos (i.e., how detailed they are), hours and comp. Any insights into long term career trajectory / exit opps are much appreciated as well. Thanks!

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Most Helpful
Mar 11, 2019

I am a research analyst at a CLO manager. For background, I came from DCM at a BB (3 years there, left as associate), and have been in my position here for 1.5 years. 50% of my time is focused on loans for CLOs, 50% for our direct lending business.

It depends on what you like, but I find the work to be interesting. Our credit memos are pretty detailed, laying out our thoughts on the business, industry, strengths, weakness, detailed bull/bear model, summary of relevant credit doc terms etc. We do however use helpful slides from the LPs the banks provide (which absolutely saves time and busy work).

I personally like working more on the riskier stuff / direct lending deals. High rated issuers offering L+175-250 paper is just not fun to work on IMO. But it is part of the territory.

Monitoring portfolio companies, pitching relative value ideas to the PMs and evaluating secondary opportunities are a big part of the job as well.

In terms of underwriting process, it isn't like banking where you pitch every issuer under the sun to win business. I'd say we probably decline 60% of deals before we even start committee memos based on red flags in a business. Then the remaining 40% are brought to committee with a hit rate of 70-80%. I can't stress enough how much time this saves compared to banking.

The work/life balance is one of the best parts of the job. 45-50 hours a week is typical here. In terms of comp, I came in at 260k for 2018, despite it being a "down year". Note I am the youngest person here (at 26yo). That scales up to 400-450k for analysts that are 30-34yo. The senior analysts here are probably making 500-700k (but that is a guess, I am not sure honestly).

Career wise, a few people have left here to go to other funds, but it isn't uncommon to stay. A few of the analysts have been here for 6+ years, in some cases 10+ years. You can't become a PM at this firm per say, but you probably can at others. But I personally think being a CLO PM is not nearly as interesting.

All in all, it's a great place to start an investing career, good comp, great hours, and interesting work.

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Mar 11, 2019

holy shit you make so much $$$

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Mar 29, 2019

Thanks for sharing! Two questions

  1. In a role like yours or at your firm do you see most these positions or companies in tier 1 cities(NY,London,etc)? In other words could someone out a bb ib or s&t find a role in a tier 2 city?
  2. What are your thoughts on loan portfolios containing a lot more cov lite loans and do you think that will have a impact on the I industry?
Apr 3, 2019

Can't really comment on tier 1 vs other tier cities. Most CLO managers are in NY, but there are absoultely others around the US / world. You would just have to do some research on your own.

For the past few years it has been an issuer friendly market so most deals have been cov-lite unless they are very hairy. When the next inevitable downturn comes I would expect to see plenty of CLOs under water (the guys who are raising as much $ as they can, and in turn buying every new issue loan). Additionally a theme we will likely see is PE companies extracting as much value out as they can before the wheels fall off given there are no maintenance covs to stop this type of behavior before it is too late.

The CLOs that are conservatively run / do actual work on the issuers should be fine. But that is just one mans opinion.

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Mar 29, 2019

Curious how it works at your fund since you may be at a Strict CLO fund.

Do you guys originate your own CLOs based on middle market lending loans? This question may be confusing and if you cannot answer it than could you provide a bit more detail on the underwriting and loan origination?

I am at an Institutional Credit Fund and we originate our CLOs from inter company lending and with syndicated middle market loans. I do not have the traditional DCM experience, so am not aware of how the actual CLO market functions.

Thanks Value892!

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Apr 10, 2019

Very informative and super helpful. However, I would call out that you likely work for a top CLO manager and given you also work on direct lending deals, your compensation is aligned properly. I could be wrong, but wanted to call that out, as all CLO managers certainly do not pay that high.

Mar 11, 2019

Thanks for sharing!
Can you see yourself there long-term? I came into a shop straight out of undergrad (1.5 years) and would love your insight on progression and compensation after leaving DCM. I focus primarily on loans and I don't do direct lending but I could be doing some more specialized work in the next year.

Mar 11, 2019
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