8CLO equity

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CLO equity is the most junior investment in a CLO. Like shareholders of a company, CLO equity investors take the most risk and also get the biggest return if things go well. CLO equity can take the form of preference shares, income notes or subordinated bonds, but is never, in legal terms, equity.

Equity investors have the right to call time on the deal. Once a non-call period has expired, they can vote to call the deal, redeem its notes and pay themselves any money left over.

Post-crisis CLOs typically have an investor which owns more than 50% of the equity tranche. This investor is known as the control equity investor.end



How equity has performed: annualised distributions for selected US CLO vintages

Source: CLO-i.




Turn to the print version of the CLO guide to find out:

Why CLOs switched to having a control equity investor in most cases after the financial crisis.

What factors determine the returns paid to equity investors.

The final return on investment of some of the best performing CLOs.