Broadly syndicated loan CLOs

Does your product fit here?

Broadly syndicated loan (BSL) CLOs are securitizations of leveraged loans to large corporate borrowers, typically rated BB or B, with EBITDA above $50M. The loans trade in a liquid secondary market, and CLO managers actively trade the portfolio during a multi-year reinvestment period. If you’re looking at CLOs backed by loans to smaller private companies, see Middle Market CLOs.

Products that fit here:

Managed BSL CLOs: The standard product. A manager assembles and actively trades a portfolio of 150-250 leveraged loans during a 4-5 year reinvestment period. The CLO issues rated debt tranches (AAA through BB) and unrated equity. 95%+ of the BSL CLO market.
Static BSL CLOs: No reinvestment period. The manager selects the initial portfolio, and it runs off over time. Rare in normal markets, but appears during dislocations when liability pricing is unfavorable for managed deals.
CLO refinancings: Existing CLO replaces its liabilities at tighter spreads without extending the reinvestment period. No new equity issued.
CLO resets: Existing CLO extends the reinvestment period and may adjust the capital structure. Often involves new equity.

What does NOT fit here:

Middle market CLOs: Loans to companies with EBITDA below $50M, less liquid, different risk profile. See Middle Market CLOs.
CRE CLOs: Backed by commercial real estate transitional loans. Completely different asset class and risk drivers. See CRE CLOs.
CDOs of ABS or CDO-squareds: Largely extinct post-2008. Different animal entirely.
Loan mutual funds or ETFs: Not securitized. You own units in a fund, not tranched credit exposure to a portfolio.
Direct lending funds: Not CLOs. Fund structures without tranched liabilities.

Edge cases

Crossover CLOs: Some managers mix BSL and middle market loans. The market classifies these based on the majority of the portfolio. If over 80% BSL, it trades like a BSL CLO. Watch the indenture’s reinvestment criteria, as some deals restrict MM loan purchases.

European CLOs: Same structure as US CLOs but backed by European leveraged loans (denominated in EUR/GBP). Different loan market dynamics, currency considerations, and investor base. Similar analytics framework applies.

Print-and-sprint CLOs: A manager issues a CLO and immediately begins ramping a new deal while spreads are favorable. Market timing arbitrage. The manager quality assessment still applies.

How the market classifies you

Manager Tier	CLO AUM	Typical Deal Size	AAA Spread (2024)	Equity Return Target
Tier 1 (Top 15)	$20B+	$500-700M	SOFR + 130-145 bps	14-17%
Tier 2	$5-20B	$400-550M	SOFR + 140-155 bps	13-16%
Tier 3	$1-5B	$350-450M	SOFR + 150-165 bps	12-15%
Emerging	<$1B	$300-400M	SOFR + 160-175 bps	Varies widely

Illustrative pricing. See pricing disclaimer.

Manager tier drives liability pricing. A Tier 1 manager can issue AAA tranches 15-25 bps tighter than an emerging manager, which flows directly to equity returns.

Market benchmarks and comps

Historical performance

BSL CLOs have an exceptional track record. Since the modern CLO structure emerged (CLO 2.0 post-2010), rated tranches have experienced minimal principal losses.

Metric	Historical Average	2008-2009 (Stress)	2020 (COVID)	2022-2023
Leveraged loan default rate	2.5-3.5%	10-12%	3-4%	2-3%
First lien recovery rate	70-80%	55-65%	65-75%	70-80%
AAA principal loss	Near zero	Near zero	Zero	Zero
BBB principal loss	Near zero	Isolated cases	Zero	Zero
BB principal loss	Near zero	Some impairment	Isolated	Zero
Equity distribution yield	15-20%	0-5%	8-12%	12-16%

Why the track record is so strong

BSL CLOs benefit from structural protections that corporate bonds lack:

Senior secured collateral: The underlying loans are first lien, senior secured obligations. In a default, you recover 65-80 cents on the dollar, not 40 cents like unsecured bonds.
Diversification: A typical CLO holds 150-250 loans across 20+ industries. Single-name risk is capped at 2-2.5% of the portfolio.
Active management: Managers can sell deteriorating credits and buy discounted loans to build par.
Coverage tests: OC and IC tests redirect cash flow to protect senior tranches when the portfolio deteriorates.
Subordination: AAA tranches have 35-40% subordination. Even in 2008-2009, this proved sufficient.

Current market metrics

When evaluating a BSL CLO, focus on these portfolio statistics:

Metric	Target/Typical	Concern Level	Red Flag
Weighted Average Spread (WAS)	3.50-4.00%	<3.25%	<3.00%
Weighted Average Rating Factor (WARF)	2700-2900	>3000	>3200
Diversity Score	65-85	<55	<45
CCC Exposure	3-5%	6-7%	>7.5% (triggers haircut)
Defaulted Assets	0-1%	2-3%	>4%
Junior OC Cushion	3-5%	1.5-2.5%	<1.5%
Par Build/(Erosion)	Positive	Flat to -1%	<-2%

Yield benchmarks by tranche (mid-2024)

Tranche	Rating	% of Structure	Spread to SOFR	All-in Yield
Class A	AAA	62-65%	130-155 bps	6.6-6.9%
Class B	AA	10-12%	185-215 bps	7.2-7.5%
Class C	A	6-8%	240-275 bps	7.7-8.1%
Class D	BBB	5-6%	350-400 bps	8.8-9.3%
Class E	BB	3-4%	650-750 bps	11.8-12.8%
Equity	NR	8-11%	N/A	12-17% target IRR

Illustrative pricing. See pricing disclaimer.

Equity returns are highly variable. They depend on liability cost, portfolio performance, par building, and manager skill. The 12-17% range assumes a normally functioning market. Stress periods compress or eliminate equity distributions.

What “good” performance looks like

OC tests passing with 3%+ cushion throughout the deal’s life
IC tests comfortably above trigger (typically 120%+ actual vs. 105% trigger)
Par build of 0.5-1.5% annually through discount loan purchases
WARF stable or improving
CCC exposure well below 7.5% limit
No more than 1-2 defaults per year in the portfolio
Distributions to equity every quarter

Red flag performance

OC cushion below 2% and declining
CCC exposure at or above 7.5% (excess CCCs get haircut to market value in OC test)
Defaulted asset concentration above 3%
Par erosion exceeding 2% with no recovery plan
Manager trading activity eroding par (selling at discounts, not building par)
Multiple quarters with reduced or eliminated equity distributions
Watch list credits (loans trading below 80) exceeding 5% of portfolio

What lenders and investors focus on

1. CLO manager quality

The manager is the single most important factor in CLO performance. Two CLOs with identical portfolios at issuance will perform differently based on how the manager trades during the reinvestment period.

What differentiates managers:

Credit selection: Does the manager avoid losers, or does the portfolio always seem to own the next blowup?
Trading discipline: Does the manager build par through discount purchases, or does aggressive trading erode principal?
Consistency: Does every deal from this manager perform similarly, or is there high variance?
Team stability: Has the PM and lead analysts been together for 5+ years, or is there turnover?

Track record metrics to request:

Historical OC test cushion by deal and vintage
Default rate vs. the market average
Par building performance (cumulative trading P&L)
Equity IRR by vintage cohort

Tier 1 managers (Blackstone Credit, PGIM, Ares, Carlyle, Apollo) have 15+ year track records across multiple credit cycles. Emerging managers may have strong individual track records but limited CLO-specific history.

2. Portfolio quality

WARF (Weighted Average Rating Factor): A numerical representation of portfolio credit quality. Lower is better. B1 rated loans carry a factor of ~2720; B2 is ~3490. A portfolio WARF of 2800 implies an average B1/B2 rating.

WARF	Implied Average Rating	Risk Level
<2600	B1	Conservative
2600-2900	B1/B2	Standard
2900-3100	B2	Elevated
>3100	B2/B3	Aggressive

WAS (Weighted Average Spread): The average spread on the loan portfolio over SOFR. Higher WAS generates more income to pay CLO liabilities and build OC cushion. However, higher WAS often correlates with lower credit quality.

Diversity Score: Moody’s metric measuring portfolio concentration. Higher is better. A score of 70 means the portfolio has risk equivalent to 70 uncorrelated obligors.

CCC and Defaulted Exposure: The indenture typically allows 7.5% CCC-rated loans at par. Excess CCCs above 7.5% get counted at market value (often 60-70% of par), which erodes OC cushion. Defaulted loans (rated D or Ca/C) typically get counted at lower of cost or market.

3. Par build and trading

The best CLO managers build par over time by:

Buying loans at discounts (85-95 cents) that perform and eventually trade back to par
Selling loans before they default or get downgraded
Participating in attractive new issue loans

Poor managers erode par by:

Holding deteriorating credits too long, selling at deep discounts
Buying loans that subsequently get downgraded
Trading too actively, giving up bid/ask spread

Par build metrics:

Cumulative trading P&L (ideally +1-2% of original par over reinvestment period)
Realized gain/loss from sales
Average purchase price vs. average sale price

4. Structural protections

OC (Overcollateralization) Test: The ratio of portfolio par value to outstanding liabilities must exceed a threshold. Typical AAA OC test threshold is 122-125%, meaning the portfolio must be worth at least $1.22-1.25 for every $1 of AAA notes outstanding.

IC (Interest Coverage) Test: The ratio of portfolio interest income to liability interest expense must exceed a threshold (typically 105-110% for senior classes).

When OC or IC tests fail:

Cash that would normally pay equity distributions instead pays down senior debt
Equity distributions are suspended until tests are cured
In severe cases, the deal may enter rapid amortization

OC cushion (actual OC ratio minus test threshold) is the key health metric. A deal with 128% actual OC and a 125% test has 3% cushion. That cushion absorbs losses before equity gets shut out.

5. Documentation and manager discretion

Indenture provisions matter. Key areas to review:

Reinvestment criteria: How constrained is the manager in buying new loans? Tighter criteria protect credit quality but limit flexibility.
Workout loan treatment: What happens when a loan defaults and gets restructured into equity or junior debt?
Trading flexibility: Can the manager sell performing loans to rotate into higher-spread credits?
Amendment thresholds: How many votes are needed to change key provisions?

Typical structures used

Standard managed BSL CLO

The typical BSL CLO today:

Feature	Standard Terms
Deal Size	$400-700M
Reinvestment Period	4-5 years
Non-Call Period	2 years
Legal Final Maturity	12-13 years
Number of Loans	150-250
Manager Fee (Senior)	0.15-0.20%
Manager Fee (Subordinated)	0.30-0.40%
Manager Incentive Fee	20% of equity distributions above hurdle

Capital Structure Example ($500M CLO):

Class	Rating	Size	% of Deal	Spread
A	AAA	$310M	62%	SOFR + 140
B	AA	$55M	11%	SOFR + 200
C	A	$35M	7%	SOFR + 260
D	BBB	$27.5M	5.5%	SOFR + 375
E	BB	$17.5M	3.5%	SOFR + 700
Equity	NR	$55M	11%	N/A

Illustrative pricing. See pricing disclaimer.

Pricing ranges (current market)

Tranche	Tier 1 Manager	Tier 2 Manager	Emerging Manager
AAA	SOFR + 130-140	SOFR + 140-150	SOFR + 155-170
AA	SOFR + 180-195	SOFR + 195-210	SOFR + 210-225
A	SOFR + 235-255	SOFR + 255-275	SOFR + 275-300
BBB	SOFR + 340-375	SOFR + 375-400	SOFR + 400-450
BB	SOFR + 625-700	SOFR + 700-775	SOFR + 775-850

The spread difference between Tier 1 and emerging managers is 15-30 bps at the AAA level. Over a 5-year deal, that difference generates an extra 75-150 bps of equity returns for Tier 1 managers.

Static CLOs

Static CLOs have no reinvestment period. The manager selects the initial portfolio, and it amortizes over time as loans pay down. These are rare (<5% of issuance) and appear when:

Liability spreads are too wide for managed CLO economics
A manager wants to lock in an attractive portfolio
Risk retention requirements favor a static structure

Static CLOs price 10-20 bps tighter than managed deals because there’s no manager trading risk.

CLO refinancing vs. reset

Refinancing: Replace existing liabilities with new liabilities at tighter spreads. The reinvestment period is NOT extended. The manager is essentially locking in lower funding costs for the remaining deal term.

Economics: Savings flow to equity (lower liability cost = higher equity distributions)
When it makes sense: Spreads have tightened materially since issuance
Process: 4-8 weeks; arranger markets new liabilities

Reset: Extend the reinvestment period (typically 2-3 years) and often resize the capital structure. May involve new equity issuance.

Economics: Extension of reinvestment period generates additional management fees and extends equity optionality
When it makes sense: Manager wants more time to deploy capital; existing equity holders want to extend duration
Process: More complex; may require new ratings, new equity

Asset-class-specific structural features

Coverage tests

Overcollateralization (OC) Tests:

OC tests compare portfolio asset value to outstanding liabilities. Each liability class has its own OC test.

Example: AAA OC Test = (Portfolio Par Value) / (AAA + AA + A + BBB + BB Notes Outstanding)

If the AAA OC threshold is 124% and the deal has $500M in rated notes outstanding, the portfolio must maintain at least $620M in par value. If par falls below that threshold, the OC test fails.

What happens when OC tests fail:

Interest that would flow to equity instead pays down the most senior notes
Equity distributions are suspended
The deal “deleveres” by reducing debt outstanding
Once OC ratios recover above the threshold, normal payments resume

OC tests cure automatically when par value recovers (through recoveries, par building, or deleveraging).

Interest Coverage (IC) Tests:

IC tests compare portfolio interest income to liability interest expense. If the portfolio earns less than ~105-110% of what’s needed to pay debt interest, cash gets redirected to senior notes.

IC failures are rare because leveraged loans carry spreads of 300-500 bps, while CLO liabilities average 200-250 bps (weighted by tranche size). There’s typically ample cushion.

Reinvestment criteria

During the reinvestment period, the manager can buy new loans using:

Principal proceeds from loan paydowns and sales
Undrawn amounts from the initial ramp period

However, new purchases must satisfy reinvestment criteria:

Criterion	Typical Requirement
Minimum Rating	B3/B- or better
Maximum Single Obligor	2-2.5% of portfolio
Maximum Industry	12-15%
Weighted Average Rating	Must maintain WARF test
Weighted Average Spread	Must maintain WAS test
Weighted Average Life	Cannot exceed maturity constraints
Recovery Rate	Must maintain minimum weighted average recovery

If the portfolio is already failing a test (e.g., WARF above threshold), the manager can only buy assets that improve the metric.

CCC bucket

Loans rated CCC+ or below are counted differently in OC tests:

First 7.5% of CCCs: Counted at par
Excess CCCs (above 7.5%): Counted at lower of par or market value

Example: A $500M portfolio with $45M of CCC loans (9%) and CCCs trading at 70 cents:

First $37.5M (7.5%) counted at par: $37.5M
Excess $7.5M counted at market: $7.5M × 70% = $5.25M
Total CCC contribution to par: $42.75M (vs. $45M actual par)

This haircut erodes OC cushion, which is why managers actively manage CCC exposure.

Defaulted and workout loan treatment

When a loan defaults:

It’s typically rated D or Ca/C
Par value is written down to market value (often 30-50 cents)
This immediately impacts OC tests

When a defaulted loan is restructured:

Cash received goes into principal or interest proceeds per indenture
Equity securities received are typically held (not sold immediately)
New debt instruments get valued at market

Workout securities often sit in a “basket” with limited trading flexibility. The manager may be constrained from selling equity received in restructurings.

Manager compensation

Fee Type	Typical Rate	Paid From	Timing
Senior Management Fee	0.15-0.20%	Senior in waterfall	Quarterly
Subordinated Management Fee	0.30-0.40%	Junior in waterfall	Quarterly
Incentive Fee	20% above hurdle	After equity hurdle	Quarterly

Illustrative pricing. See pricing disclaimer.

The incentive fee typically applies to distributions above a 12% IRR hurdle to equity. Some structures include catch-up provisions.

Total manager compensation on a $500M CLO: approximately $1.5M in senior fees + $1.75M in subordinated fees = $3.25M annually in base fees, plus incentive fees if equity performs.

Rating agency treatment

BSL CLOs are typically triple-rated (S&P, Moody’s, Fitch). Each agency uses proprietary models but reaches similar conclusions on enhancement levels.

S&P approach

S&P uses CDO Evaluator, a Monte Carlo simulation model that estimates portfolio default probability and loss distribution.

Key inputs:

Individual loan ratings (mapped to S&P default probabilities)
Industry correlations (loans in the same industry have correlated default risk)
Recovery rate assumptions by seniority (first lien senior secured: 55-70% at AAA stress)

Manager assessment: S&P assigns managers to tiers (ABOVE AVERAGE, AVERAGE, BELOW AVERAGE) based on historical performance. Higher-rated managers may receive modest credit in the analysis.

Typical AAA subordination requirement: 35-40%

Moody’s approach

Moody’s uses CDOROM (CLO Rating Optimization Model) with these key metrics:

WARF: Weighted average of loan rating factors
Diversity Score: Measure of portfolio concentration
Weighted Average Recovery Rate: Expected recovery in default
Par Coverage Ratio: Assets divided by liabilities at each rating level

Moody’s also assesses manager quality and may adjust assumptions based on historical performance.

Typical AAA subordination requirement: 36-41%

Fitch approach

Fitch uses the Portfolio Credit Model (PCM) with:

Default probability curves by rating
Recovery rate assumptions
Correlation assumptions
Cash flow modeling under stress scenarios

Fitch’s manager assessment considers team stability, track record, and operational capabilities.

Typical AAA subordination requirement: 35-39%

Typical credit enhancement levels

Rating	Subordination	Total CE (incl. OC)
AAA	35-40%	37-42%
AA	25-28%	27-30%
A	18-22%	20-24%
BBB	13-16%	15-18%
BB	9-12%	11-14%

Key stress scenarios tested

Front-loaded defaults: High default rate in years 1-3, testing OC cushion
Extended defaults: Moderate defaults over the full deal life
Low recovery: Defaults occur with below-average recoveries
Correlation stress: Defaults cluster in specific industries
Interest rate stress: Rising rates impact floating-rate asset/liability mismatch (minimal for BSL CLOs, which are both floating)

Diligence focus areas

Manager diligence

For any CLO investment, especially equity, manager diligence is critical.

Track record analysis:

Request performance data for all CLOs the manager has issued
Calculate OC cushion evolution over time (better managers maintain cushion)
Compare default rates to market benchmarks (S&P/LSTA index)
Review trading P&L (did the manager build or erode par?)

Team assessment:

Key person identification (who makes credit decisions?)
Team stability (any recent departures from credit team?)
Compensation alignment (does the PM’s comp depend on CLO performance?)

Investment process:

Credit committee structure and decision-making
Position sizing discipline
Sell discipline (when do they exit?)
Workout experience

Operational infrastructure:

Trade execution capabilities
Compliance monitoring
Investor reporting quality

Portfolio analysis

Loan-level review:

Review the largest 20-30 positions (typically 40-50% of the portfolio)
Assess company fundamentals, leverage, interest coverage
Identify any “story credits” or names on watch lists

Concentration analysis:

Industry breakdown vs. limits
Top 10 obligor exposure
Geographic concentration (if relevant)

Mark-to-market:

What’s the current portfolio trading value vs. par?
How many loans are trading below 90? Below 80?
What’s the implied loss content of the discount?

Forward-looking assessment:

Which loans are on ratings watch negative?
What’s the probability of migration to CCC?
Are there any imminent maturities that could cause issues?

Structural analysis

Coverage test cushion:

Current OC and IC ratios vs. triggers
Historical cushion trends (expanding or contracting?)
Sensitivity analysis: how many defaults to trip OC test?

Reinvestment criteria review:

Are criteria appropriately restrictive?
Does the manager have flexibility to build par?
Any unusual provisions?

Waterfall mechanics:

Cash flow priority (interest vs. principal)
Equity distribution mechanics
Manager fee priority and structure

Legal review

For rated tranches, indenture review focuses on:

Amendment voting thresholds
Workout loan treatment
Acceleration triggers
Trustee responsibilities

For equity investments, pay close attention to:

Manager discretion limits
Removal provisions (can equity fire the manager?)
Incentive fee calculation
Refinancing/reset mechanics

Active participants

CLO managers (tier 1, $20b+ AUM)

Manager	Approximate CLO AUM	Notes
PGIM	$30B+	Long track record, conservative style
Blackstone Credit	$25B+	Diverse credit platform
Ares Management	$25B+	Active trader, par building focus
Carlyle	$25B+	Global platform
Apollo	$20B+	Opportunistic style
GSO/Blackstone	$20B+	Part of Blackstone Credit
KKR	$18B+	Growing platform
Bain Capital Credit	$15B+	Strong performance history

CLO managers (tier 2, $5-20b AUM)

Sound Point Capital, Golub Capital, Owl Rock (Blue Owl), Crescent Capital, Benefit Street Partners, Intermediate Capital Group, Barings, Octagon Credit, Voya Investment Management, MJX Asset Management.

CLO managers (emerging/specialty)

Managers with $1-5B in CLOs or specialized strategies. Higher liability spreads but potentially differentiated credit selection.

Arrangers/underwriters

Bulge bracket: JPMorgan, Morgan Stanley, Citi, Bank of America, Barclays, Deutsche Bank, Goldman Sachs
Active in CLO: Wells Fargo, Credit Agricole, Natixis, Jefferies

Arrangers structure the deal, place the liabilities with investors, and provide warehouse financing during ramp.

CLO debt investors

AAA: Japanese banks (Norinchukin, MUFG, Mizuho, SMBC), US and European banks, insurance companies, money market funds (eligible tranches)
AA/A: Insurance companies, pension funds, credit funds
BBB/BB: Credit funds, insurance companies (limited), hedge funds
Equity: Dedicated CLO equity funds, hedge funds, CLO managers (risk retention)

Trustees and administrators

Trustees: US Bank, Wilmington Trust, Bank of New York Mellon, Citibank
Collateral administrators: US Bank, CIFC, Virtus

Rating agencies

S&P, Moody’s, and Fitch are the primary agencies. All three typically rate a BSL CLO. DBRS and KBRA are less common but appear on some deals.

Legal counsel

Manager/issuer side:

Cadwalader, Wickersham & Taft
Dechert
Milbank
Paul Hastings
Latham & Watkins
Proskauer

Arranger/underwriter side:

Cahill Gordon & Reindel
Simpson Thacher & Bartlett
Davis Polk

Red flags and off-market characteristics

Manager red flags

Team instability: PM or senior analyst departures within 12 months of deal issuance
Poor track record: OC test failures across multiple deals, especially if recent
Par erosion history: Consistent pattern of eroding par through trading (selling losers at deep discounts)
Style drift: Historically conservative manager suddenly buying more aggressive credits
Concentrated losers: Multiple deals from this manager holding the same troubled credit
Opacity: Unwillingness to share detailed track record data with prospective investors

Portfolio red flags

CCC concentration at limits: If CCC exposure is already 7%+, there’s no room for downgrades
Defaulted asset concentration: More than 3% in defaults signals potential problems
Single-industry concentration: More than 15% in one industry (especially retail, energy, or healthcare)
Large single-name exposure: Any position above 2.5% of portfolio
Discount portfolio: If the average loan price is below 95, there may be hidden credit problems
Watch list concentration: More than 5% of portfolio on S&P/Moody’s negative watch

Structural red flags

Thin OC cushion at issuance: Starting with less than 3% cushion means limited room for error
Loose reinvestment criteria: Manager can buy low-quality assets with few constraints
Unusual manager discretion: Provisions allowing manager to waive reinvestment criteria
Low voting thresholds: Important amendments require only simple majority
Off-market fees: Management fees above 0.50% total or incentive fees without appropriate hurdles

Market cycle considerations

Late-cycle concerns:

Credit quality deteriorates before defaults spike (watch WARF creep)
Spread compression reduces equity returns
Loan covenants weakest at cycle peaks (covenant-lite dominates)
New CLO formation may slow, creating refinancing risk

Post-default spike considerations:

Recovery rates may be lower than historical averages if many companies default simultaneously
Correlation across industries may be higher than models assume
Liquidity in the leveraged loan market may dry up, constraining manager trading

What protected CLOs in past downturns:

Senior secured position with strong recovery
Active management allowed selling deteriorating credits
Coverage tests forced deleveraging before equity was wiped out
Diversification prevented single-name blowups from breaking deals

Summary: BSL CLOs at a glance

Dimension	BSL CLO Characteristics
Underlying Assets	Senior secured leveraged loans to large corporates
Typical Portfolio Size	$400-700M (150-250 loans)
Manager Role	Active trading during 4-5 year reinvestment period
Key Risk Drivers	Manager quality, portfolio credit, structural protections
Historical Track Record	Excellent for rated tranches; variable for equity
Primary Investors	Banks (AAA), insurers (IG), funds (mezz/equity)
Key Structural Features	OC/IC tests, CCC buckets, reinvestment criteria
Typical AAA Spread	SOFR + 130-165 bps
Typical Equity Return	12-17% target IRR

For capital providers considering BSL CLO investments, the asset class offers attractive risk-adjusted returns with structural protections unavailable in corporate bonds. For those evaluating CLO managers or considering launching a CLO program, manager quality is the dominant factor in liability pricing and equity returns.