Structured Products Overview

Highland was one of the early pioneers in the collateralized loan obligation (CLO) market, setting up one of the first non-bank CLO deals in 1996.

In addition to our expertise as a CLO manager, Highland has experience as a CLO investor, operating secondary CLO investment portfolios.

Highland’s CLO capabilities are integrated across the broader investment platform, which helps the firm provide clients with unique investment opportunities.

Structured Products Vehicles

Highland offers exposure to the CLO market through a range of vehicles, including: managed CLOs; separately managed accounts; and CLO funds.

CLO Investing Overview

A CLO is an issuance of securities (AAA to B) and an equity tranche backed by the cash flows from a diversified pool of senior secured corporate bank loans.

CLOs are structured with a re-investment period, allowing the CLO Manager to actively buy and sell assets, subject to asset quality covenants for a period of 3-5 years.

The return paid to the equity holders is the difference between the current yield on the underlying assets and the financing cost of the issued notes.

How We Invest

CLO Management

⇒ Seeks to achieve better absolute performance with less risk, while providing investors with maximum transparency

⇒ Invests in larger, liquid, broadly syndicated bank loans

⇒ Utilizes a rigorous credit research process with a low ratio of credits per analyst

⇒ Supplements bottom-up analysis with a disciplined approach to risk management and portfolio monitoring

CLO Investing

⇒ Seeks to achieve attractive absolute returns while minimizing volatility

⇒ Evaluates CLO tranches using a combination of rigorous qualitative (portfolio, manager and legal considerations) and quantitative (structural, cash-flow, collateral valuation and pricing/relative value) analysis

⇒ Utilizes a proprietary quantitative analytical tool to view and track the credit research team’s credit opinion on each individual loan, including ratings downgrade probability and timing, default probability and estimated recovery values