CLO Warehouses, Equity Returns, and Market Structure

Matthew Layton discusses the large number of open CLO warehouses globally, noting that many represent strategic positioning rather than immediate issuance pipelines. He explains that CLO equity returns have reset to low double digits rather than the high-teen IRRs of prior years, and that this is becoming the new normal. He also explores how secondary CLO equity — particularly end-of-reinvestment-period paper — can offer IRRs of 30-40% with strong cash-on-cash protection. Adeel adds that CLO equity compares favorably to private equity on DPI and to private credit on transparency.