Vanishing CLO Profits Spark Infighting and Investor Exits Amid Plunging Returns

Returns on the riskiest portions of Collateralized Loan Obligations (CLOs), specifically CLO equity tranches, have plunged significantly, with some funds experiencing a 50% decline over the past two years. This deterioration has led to infighting among investment managers and prompted some long-term buyers to seek exits from the market. The underlying loan performance has not been sufficient to compensate equity buyers for the associated risks.