What's the impact of Coronavirus on Structured Credit Investing (ABS, CLOs)?
Like the subject says, I'm curious what the impact of coronavirus is on structured credit investing (ABSs and CLOs), which has become an increasingly large portion of credit fund aum. Does the recent massive selloff and the likely transition of performing assets to NPLs imply buying opportunites for structured credit investors. increased necessity of due dillegence, or increased disposal (due to riskiness) on the part of credit firms? It seems corporate bond investors intend to invest heavily back into corporate bonds (since bond and equity nowadays trade quite similarly), but considering that structured credit trades primarily on the strength of the underlying cashflows (which are now most likely gonna be strapped), I'm really confused what the future of this sector will look like in current market conditions. To reiterate, for example, do investors wait for NPLs to become performing, or will this be a time to jump in on structured credit at record low prices in the meantime?
I would really appreciate the chance to hear any of this community's thoughts.
Hey StarryKnight8888, what a lonely thread. I'm here since nobody responded ...so maybe one of these discussions will help:
If those topics were completely useless, don't blame me, blame my programmers...
bump
Regarding CLOs, we will most likely see increased defaults in the underlying loans. We observed managers swapping out of troubled names in March to avoid tripping OC tests. It depends on where you are investing in the cap structure and the quality of the asset manager, the flexibility allowed by the CLO docs, etc... Interesting enough there is a CLO ETF being introduced this year that will invest primarily in AAA rated CLO notes.
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