are collateralized loan obligations defaulting, or is some hedge fund blowing up? I noticed some strange price action of a certain CLO ETF (not going to give the ticker), and wanted to know if anyone knows if it is because CLOs are defaulting, a hedge fund meeting margin requirements, or something else?
There's a stock that's acting strange. I'm not going to tell you the stock, but can you tell me if its because the insiders are selling?
I don't think so. I own 3 CLO ETFs and one CEF (OXLC). Yes Oxford Lane did have a huge hiccup 2 days ago, down about 6%. CLOZ JBBB PCMM are still pretty stable.
ai The unusual price movements in your CLO ETF could stem from several factors, including potential defaults within CLOs or significant actions by hedge funds. Here's an overview: CLO Defaults: Collateralized Loan Obligations (CLOs) are securities backed by a pool of loans, often to companies with lower credit ratings. While defaults within these underlying loans can impact CLO performance, recent reports do not indicate a widespread increase in CLO defaults. In fact, Europe's first CLO ETF was launched recently, reflecting investor confidence in these instruments .ft.com Hedge Fund Activity: Hedge funds play a significant role in the financial markets, and their strategies can influence asset prices. Recent developments include: Increased Leverage: Global regulators have raised concerns about rising leverage among hedge funds, particularly in strategies like the cash-futures basis trade. This heightened leverage can amplify market shocks and lead to rapid asset liquidations during downturns .ft.com Risk Reduction: Some hedge funds have been unwinding positions at levels reminiscent of early 2020, aiming to mitigate risks amid market volatility .reuters.com Historical Precedents: The collapse of Archegos Capital Management in 2021 serves as a cautionary tale. Archegos's highly leveraged positions led to significant losses for major banks when the firm defaulted on margin calls .es.wikipedia.org+3en.wikipedia.org+3en.wikipedia.org+3 Potential Implications for Your CLO ETF: The price fluctuations in your CLO ETF might be influenced by: Market Sentiment: Negative news or concerns about leveraged positions can lead to broader market sell-offs, affecting various asset classes, including CLOs. Liquidity Needs: Hedge funds facing margin calls or seeking to reduce leverage might liquidate holdings, impacting the prices of securities within CLOs. Conclusion: While there's no specific evidence pointing to widespread CLO defaults, the interconnectedness of financial markets means that hedge fund activities and broader market dynamics can influence CLO valuations. Monitoring these developments and consulting with a financial advisor can provide more personalized insights into your investments. Recent Developments in Hedge Fund Leverage and CLO Markets ft.com Hedge fund leverage is rising as a concern for regulators 5 days ago reuters.com Hedge funds unwinding risk as in early days of COVID, Goldman Sachs says 2 days ago ft.com Europe's first collateralised loan ETF listing overcomes concerns 184 days ago
If this is any indication since top March 3rd (-0.69% down) High Yield Bonds have hardly been affected by overall market tRump Tariff Tantrum Turmoil - although I guess it could be the start of it? TWT
I own about 18 credit ETFs/CEFs as my fixed income portion. The floating rate & CLO loans behave differently depending on the nature of the instrument. The ETFs are stable but the yield goes down. The CEFs try to maintain their dividend so the principal goes down. A write down like OXLC had a few days ago means they will be reducing their dividend soon. I own VVR which had write downs in December. The best instruments are the ones that know what they own & hedge it themselves. FSCO is an example of a superior strategy employed by the PMs. PGIM is a company that always hedges positions in their ETFs/CEFs. They run PFRL & GHY which are pretty stable. First Trust also hedges their positions in the ETFs/CEFs. FCT is very stable as a floating rate CEF.