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Navigating Turbulent Global Credit Markets

What foundations do successful CLO Managers implement that allow them to navigate contractions and potential stricter covenant terms as the global CLO markets return?
Christopher Bloechle
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What CLO Managers Need today to Succeed.

According to Blackstone Credit, "In 2020, the global credit markets experienced the worst bout of volatility and market disruption since the 2008 financial crisis." For the first quarter of 2021, FitchRatings reported strong issuance in the U.S. market, as momentum built up from last year. The volume was well above that of the same quarter the previous year when the covid-pandemic started disrupting markets and halted activity for a short time.

For firms, this means that in the current CLO and larger credit marketplace, they require the ability to quickly act on information and analyze it to make empowered and nimble decisions around investments, credit selection, and due diligence. What foundations do successful CLO Managers implement that allow them to navigate contractions and potential stricter covenant terms as the global CLO markets return?  

The right technology sets the pace.

Navigating the volatility of today's market requires future-proof technology solutions. If CLO Managers wish to mitigate inefficiencies and the risk of making critical decisions off the back of inaccurate data, they now require an integrated front, middle and back-office platform. But technology alone is not the force multiplier of growth. To achieve profitability, CLO Managers need the right technology, purpose-built for the nuances and complexities of their business.  

Technology also helps CLO Managers face the ever-increasing pressure and scrutiny from today's investors, regulators, and rating agencies. The right solutions provide the insights needed into their investment composition and operational processes. The best CLO platforms must support all CLO assets, automate repetitive processes and data entry, simplify workflows, and unite the front, middle, and back-office in the cloud.  

Checking the Compliance Box.

CLO managers must evidence for regulators that their operations meet specific criteria in both terms of technology and eligibility – compliance not found in average funds. Meanwhile, the often-dated communication practices often prevalent amongst underlying assets can make it challenging for managers to meet the tight and frequent reporting timelines. These requirements require a robust technology platform, and leading CLO managers rely on it.  

Build a Faster Boat, Go Further.

Increased efficiency, scale, and transparency are integral for today's CLOs to scale operations. Leading CLO Managers want a transparent front-office view that can centralize pre-trade compliance and investment data along with a Middle and Back Office that streamlines the user experience to allow for quicker hypothetical trade scenarios and customized reports. Automation reduces the opportunity for human error, saves time, and enables data feeds, including the security master, pricing, ratings, and reconciliations, a key foundation advantage.  

The complexity of CLO documentation and the need for easy access to deal info requires firms to harness the power of technology and solutions that simplify the time-consuming processes of CLO investing. As today's managers adapt their deals to handle the fallout of the pandemic, robust tools to handle documentary complexity have become all the more important.

See Portfolio BI's robust solution in action, schedule a demo.

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