Fixed income
The case for CLO equity: complementing private equity
Traditional private equity funds – portfolios of privately-owned companies which have been acquired by specialized firms, or “sponsors” – are a mainstay allocation for many institutional investors. These funds account for a significant portion of the alternatives exposure in public pensions, endowments, family offices, and other sophisticated, long-horizon investors.
This paper discusses why adding CLO equity to private-equity alternatives allocations may be worth considering. Overall, this unique asset class provides benefits for institutional investors seeking increased potential for diversification, liquidity, and historically favorable outcomes in higher interest rate environments.
Key highlights
- The headwinds facing private equity
- A comparison of CLO equity to private equity
- The case for adding CLO equity to an alternatives allocation
An environment of higher-for-longer interest rates is likely to tilt returns in favor of debt holders and be a potential advantage to the current vintage of CLO equity.
Featured insights
Endnotes
This material is not intended to be a recommendation or investment advice, does not constitute a solicitation to buy, sell or hold a security or an investment strategy, and is not provided in a fiduciary capacity. The information provided does not take into account the specific objectives or circumstances of any particular investor, or suggest any specific course of action. Investment decisions should be made based on an investor’s objectives and circumstances and in consultation with his or her financial professionals. The views and opinions expressed are for informational and educational purposes only as of the date of production/writing and may change without notice at any time based on numerous factors, such as market or other conditions, legal and regulatory developments, additional risks and uncertainties and may not come to pass. This material may contain “forward-looking” information that is not purely historical in nature. Such information may include, among other things, projections, forecasts, estimates of market returns, and proposed or expected portfolio composition. Any changes to assumptions that may have been made in preparing this material could have a material impact on the information presented herein by way of example. Past performance is no guarantee of future results.
All information has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. There is no representation or warranty as to the current accuracy, reliability or completeness of, nor liability for, decisions based on such information and it should not be relied on as such.
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A word on risk
All investments carry a certain degree of risk, including loss of principal, and there is no assurance that an investment will provide positive performance over any period of time. Any investment in collateralized loan obligations or other structured vehicles involves significant risks not associated with more conventional investment alternatives. The portfolios described herein are dynamic and may change over time. Use of the investment process tools and techniques described herein is no guarantee of investment success or positive performance.
Nuveen Asset Management, LLC is a registered investment adviser and an affiliate of Nuveen, LLC.
