Zero Yield Environment

  • Central banks globally have lowered interest rates to zero which has caused institutional investors to take on risk in search of  yield.
  • The Collateralized Loan Obligation (CLO) Market has shown a recent resurgance; the new issuance volume in February 2012 was the largest since the financial crisis of 2008 and market participants are estimating that 2012 may see $20 to $25 million of new CLOs.
  • A more active CLO Market creates more demand for syndicated bank loans which allows companies to refinance maturing debt.
  • Most of the asset classes that offer yield in this environment also expose capital to considerable amounts of volatility.  HCM believes that the perfect Yield Solution in this environment is a portfolio constructed of select syndicated bank loans, bonds trading yield-to-call, and short maturity, BB-rated bonds.

CLO Issuance Predicted To Double

CLO Issuance Graph