Simon Gold agrees that equity has moved into a zero-sum-game type of environment, where winners and losers will be more distinctly evident in 2021. He says ISP Group remains invested in CLO equity but is focused on the potential for changes in the yield curve and broader macro implications.
New issue equity, however, looks spreads. Triple As is also cheap relative to comparable fixed income asset classes, and they benefit from embedded Euribor floors.
For Simon Gold, mezzanine, in particular CLO double Bs, looks relatively attractive on a long-term basis, with longer duration risk trading well into the 600s on a discount margin basis. “The tights for this product were 460-490 DM in 2017 and over several years,” he says. “Double Bs have only traded wider than 700 DM for relatively brief periods post financial crisis.”