Portfolio Strategy
Understanding Collateralized
Loan Obligations
Summary
Collateralized loan obligations (CLOs) are typically a high yielding, scalable,
oating-rate investment alternative to corporate bonds with a history of
stable credit performance. CLOs represent a $970 billion asset class within
the broader $12 trillion structured credit xed-income market, which also
includes asset-backed securities (ABS). CLOs derive principal and interest
from an actively managed, diversied pool of non-investment grade,
senior-secured corporate loans.
These loans, also known as bank loans or leveraged loans, typically occupy
a rst-lien position in the company’s capital structure, are secured by the
company’s assets, and rank rst in priority of payment ahead of unsecured
debt in the event of bankruptcy.
The combination of diversified, actively managed, senior-secured loan
collateral along with sound securitization structures has resulted in
favorable historical ratings performance. CLOs’ historically low default rate
across the ratings spectrum compares favorably to corporate debt.
Investing in CLOs is not without risk. As with other securities, CLOs
are subject to credit, liquidity, and mark-to-market risk, and the basic
architecture of CLOs requires that investors must understand the waterfall
mechanisms and protections as well as the terms, conditions, and credit
prole of the underlying loan collateral.
However, CLOs have several features that make them an integral
component of Guggenheim’s xed-income strategies. One of the most
important characteristics of CLOs is their oating-rate coupon, which helps
insulate bond prices from volatile interest rates.
§ Collateralized Loan Obligations (CLOs) represent a high yielding,
scalable, floating-rate investment alternative with a history of stable
credit performance.
§ Credit performance through the Great Financial Crisis (GFC) and COVID-19
risk cycles has supported growth in the CLO market, broadened the investor
base, and supported secondary market liquidity.
§ Guggenheim Investments’ long-term experience mobilizing credit research,
structural analysis, analytic infrastructure, and legal expertise in service of
our investment process positions us to capture the attractive relative and
fundamental value in CLOs though a cycle.
Contents
Report Highlights
Investment Professionals
Anne B. Walsh, JD, CFA
Chief Investment Ocer,
Guggenheim Partners
Investment Management
Karthik R. Narayanan, CFA
Managing Director,
Head of Structured Credit
Scott Kanouse
Director,
Structured Credit
Overview: What Are CLOs? ............................................................. 2
Understanding CLO Collateral: Leveraged Loans ........................... 3
Understanding CLO Structures ...................................................... 4
Historical Performance .................................................................. 7
Investor Sponsorship ..................................................................... 8
Investing in CLOs ......................................................................... 10
The Guggenheim Approach ........................................................... 11
1Guggenheim Investments Understanding Collateralized Loan Obligations – 2023
Overview: What Are CLOs?
1. Source: Guggenheim Investments, SIFMA, JP Morgan, Bank of America. Data as of 9.30.2023. CLOs are complex investments and not suitable for all investors. Investors in CLOs
generally receive payments that are part interest and part return of principal. These payments may vary based on the rate at which loans are repaid. Some CLOs may have structures
that make their reaction to interest rates and other factors dicult to predict, make their prices volatile, and subject them to liquidity and valuation risk. Please see “Important Notes
and Disclosures” at the end of this document for additional risk information.
Understanding CLOs: CLO Capital Market Ecosystem
§ Finance buyouts, dividends, or CapEx
§ Rated below investment grade
§ Borrowing is oating rate at SOFR + 300–600bps
§ Private equity sponsors
§ Public markets
§ Private ownership
§ Banks
§ Money Managers
69% or $970bn
§ 31% or $430bn
§ Loan ETFs
§ Separately Managed Accounts
§ Credit Funds, Business Development
Companies (BDCs)
§ Banks
§ Hedge Funds
§ BDCs
§ Money
Managers
§ Banks
§ Money
Managers
§ Insurance
Companies
Leveraged Loan Market ($1.4 trillion) Equity
CLO Market (69%) Debt Investors (31%)
AAA (65%) BB-Equity (13%)AA-BBB (22%)
Source: Guggenheim Investments, SIFMA, LCD. Data as of 9.30.2023.
CLOs are a $970 billion asset class within the broader $12
trillion structured credit xed-income market
1
, which also
includes asset-backed securities (ABS). CLOs derive principal
and interest from an actively managed, diversied pool of
non-investment grade, senior-secured corporate loans.
CLOs use funds received from the issuance of debt and
equity to investors to acquire a diverse portfolio of typically
more than 200 loans. The debt issued by CLOs consists of a
variety of tranches, each with a risk/return prole based on
its seniority and claim priority on the cash ows produced by
the underlying loan pool.
These loans, also known as “bank loans” or “leveraged loans,”
typically occupy a rst-lien position in the company’s capital
structure, are secured by the company’s assets, and rank
rst in priority of payment ahead of unsecured debt in the
event of bankruptcy. Economically, the CLO equity investor
is the owner of the pool of loans and the CLO debt investors
provide term nancing to acquire the pool of loans.
2 Guggenheim InvestmentsUnderstanding Collateralized Loan Obligations – 2023
Leveraged loans’ senior secured status has historically led to lower default rates and higher recoveries compared to high-yield bonds.
CLOs historically have further mitigated default and recovery risk of individual company credits by holding diverse portfolios of leveraged
loans—typically more than 200 borrowers—that are actively managed.
Leveraged Loan vs. High-Yield Default Rates
High-Yield Bonds Par-Weighted Default Rate Loans Default Rate by Volume
0%
2%
4%
6%
8%
10%
12%
14%
16%
2004
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2022
2021
1998
1999
2000
2001
2002
2003
2005
Source: Guggenheim Investments, JP Morgan. Data as of 10.31.2023. Past performance does not guarantee future success.
Recovery Rates for Leveraged Loans and High-Yield Bonds
High-Yield Bond Recovery Rate 1st Lien Loan Recovery Rate
0
10
20
30
40
50
60
70
80
90
100
2004
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2022
2021
1999
2000
2001
2002
2003
2005
LTM
Understanding CLO Collateral: Leveraged Loans
A portfolio of loans act as the collateral supporting a CLO.
The proceeds of these loans are typically used by
non-investment grade borrowers to support a range of
activities, including mergers and acquisitions, stock
repurchases, dividend payments, leveraged buyouts, or
investment in new projects. Loans are provided by a group
or “syndicate” of institutional lenders and arranged by an
investment bank. Most CLO collateral consists of senior
secured loans, or rst-lien loans, which have a priority
claim on all of the related company’s assets in the event of
a bankruptcy and are intended to be a less risky investment
in these companies. Loans carry oating-rate coupons
typically benchmarked to the Secured Overnight Financing
Rate (SOFR). Loans carry a number of covenants, including
nancial covenants that may restrict lender-unfriendly
actions, and require compliance with certain credit metrics.
The senior secured position of these loans has contributed to
higher historical recoveries in default scenarios than those
seen in the high-yield bond market.
3Guggenheim Investments Understanding Collateralized Loan Obligations – 2023
Understanding the Typical Structure of a CLO
Cash ow distributions begin with the senior-most debt tranches of the CLO capital structure and ow down to the bottom equity
tranche, a distribution methodology that is referred to as a waterfall.
Hypothetical illustration showing a generic single-B corporate capital structure and a generic CLO capital structure with typical pricing levels in the current market as of 9.30.2023.
Corporate Capital Structure CLO Capital Structure
Equity
Enterprise
Value
Senior
Secured
Loans
Unsecured / Subordinated Debt
Equity
Understanding CLO Structures
At its inception, a CLO raises money to purchase a portfolio
of loans by selling various debt and equity tranches to
investors. Each tranche has a dierent claim priority on
the cash received from the loan pool and exposure to loss
from the underlying collateral pool. Cash ow distributions
begin with the senior-most debt tranches of the CLO capital
structure and ow down to the junior-most equity tranche—
a distribution methodology that is referred to as a waterfall.
The cash ow waterfall and a suite of performance tests and
collateral concentration limits provide varying degrees of
protection to the CLO’s debt tranches.
The CLO’s most senior and highest-rated AAA tranche carries
the lowest coupon but is entitled to the highest claim on
the cash ow distributions and is the most loss-remote.
Mezzanine tranches pay higher coupons but are more
exposed to loss and have lower ratings. The most junior
and riskiest part of the CLO capital structure is the equity
tranche, which is neither rated nor coupon bearing. Instead,
the equity tranche represents a claim on all excess cash ows
that remain once the obligations for all debt tranches have
been met. AAA senior tranches are the largest and typically
AAA
SOFR+170 bps; 6.5yr WAL
BBB
SOFR+500 bps; 9.4yr
Equity
Debt
Losses
Payments
AA
SOFR+260 bps; 8.5yr
A
SOFR+300 bps; 9.0yr
BB
SOFR+825 bps; 9.7yr
4 Guggenheim InvestmentsUnderstanding Collateralized Loan Obligations – 2023
represent 70 percent of the capital structure. Mezzanine
AA to BB-rated tranches are much smaller and typically
represent 4–12 percent of the capital structure each. Equity
tranches vary in size but are typically about 8–10 percent of
the capital structure.
CLOs are governed by a series of coverage tests to measure
the adequacy of the collateral balance and of cash ows
generated by the underlying bank loan collateral. One such
test is an overcollateralization test (OC test), which ensures
the principal value of the bank loan collateral pool exceeds
the outstanding principal of the CLO debt tranches. If the
bank loan collateral’s principal value declines below the
OC test trigger value, cash that otherwise would have been
distributed to the equity and junior CLO tranches will be
used to instead pay down senior debt tranche investors.
Another test computes interest coverage (IC test), which
ensures the adequacy of cash collected from the bank loan
collateral to pay CLO tranche interest. If collateral collections
decline below the IC test trigger value, cash that otherwise
would have been distributed to the equity and junior CLO
tranches will be used instead to pay down senior debt
tranche investors, in a manner similar
to the OC test described earlier. CLOs are also subject
to a variety of collateral concentration limits that seek
to limit risk in the bank loan collateral pool and protect
CLO investors from loss. Examples of these limits include
requirements for industry diversication in the underlying
pool of bank loans and exposure to non-senior secured loans
and single obligors. There are also limitations on the balance
of CCC-rated loans that can be included in the underlying
collateral pool, which helps contain overall default risk.
Most CLO portfolios are actively managed. The collateral
manager seeks to mitigate losses from loan defaults and
optimize the bank loan portfolio’s value through actively
managing the holdings and positioning of the portfolio
over a predened reinvestment period. CLOs do not have
mark-to-market tests and are only dependent upon cash ow
performance (e.g., timely payment of principal and interest),
ratings, maturities, and defaults of the underlying bank
loans. Therefore, CLO managers are not forced sellers during
periods of market volatility, and can buy and sell bank loans
to take advantage of opportunities in the market to nd
value or minimize losses on deteriorating credits.
Performance Tests
Excess Spread: The weighted average coupon of the
loan collateral is higher than the coupon paid to investors
to create an additional buer of cash.
Subordination: Deals are structured so junior tranches
absorb losses before senior tranches.
Risk-reduction technique that increases the likelihood
of repayment relative to the intrinsic risks of the
underlying collateral.
Overcollateralization Test: Par amount of assets / Outstanding
amount of related tranche and all tranches senior to it.
Interest Coverage Test: Interest on Assets / Interest due on
related tranche and all tranches senior to it.
Risk-reduction technique that increases the
likelihood
of repayment relative to the intrinsic risks of the
underlying collateral.
Redirect cash ows from subordinate tranches to purchase
additional collateral loans and repay senior debt if collateral
performance deteriorates.
Structural Protections of CLOs
Credit Enhancement
Excess Spread: The weighted average coupon of the
loan collateral is higher than the coupon paid to investors
to create an additional buer of cash.
Subordination: Deals are structured so junior tranches
absorb losses before senior tranches.
Risk-reduction technique that increases the likelihood
of repayment relative to the intrinsic risks of the
underlying collateral.
Excess Spread: The average interest collected from the
loan collateral is higher than the interest paid to investors
to create an additional buer of cash.
Subordination: Deals are structured so that junior tranches
absorb losses before senior tranches.
Risk-reduction technique that increases the
likelihood
of repayment relative to the intrinsic risks of the
underlying collateral.
Risk-reduction feature that increases the likelihood
of repayment relative to the intrinsic risks of the
underlying collateral.
Source: Guggenheim Investments.
5Guggenheim Investments Understanding Collateralized Loan Obligations – 2023
Breaking Down a CLO’s Lifecycle
CLO Lifecycle: CLOs typically last eight to 10 years, during
which time a series of milestones are passed.
Warehouse Period: A warehouse provider nances the
CLO manager’s acquisition of leveraged loan assets. The
warehouse period typically takes three to nine months. The
warehouse loan is expected to be paid o with the proceeds
from the CLO’s issuance.
Ramp-Up Period: After closing, the CLO manager uses the
proceeds from the CLO issuance to purchase additional assets.
The ramp-up period usually lasts three to six months and
concludes at the ramp-up end date.
Reinvestment Period: The collateral manager is permitted to
actively trade underlying assets within the CLO and uses
principal cash ow from underlying assets to purchase new
assets. The reinvestment period may last up to ve years.
Non-Call Period: During the non-call period the equity may
not call or renance the CLO debt tranches. Non-call periods
may last six months to two years, depending on the length
of the reinvestment period. After that point, CLO equity
tranche owners have the right, but not the obligation, to
renance the CLO.
Amortization Period: After the reinvestment period ends,
the CLO enters its amortization period, during which cash
ows from the CLO’s underlying assets are used to pay down
outstanding CLO debt. The amortization period represents
the end of a CLO’s lifecycle.
Lifecycle of a CLO
Source: Guggenheim Investments, Wells Fargo.
$ Collateral Balance
Date
Reinvestment
Period Ends
Non-Call
Period Ends
Ramp-Up
End Date
CLO Closing
Date
Warehouse
Period
Warehouse
bank provides
CLO manager
with nancing
to acquire
assets.
Ramp-Up
Period
Proceeds
from CLO
issuance
are used
to
purchase
additional
assets.
Reinvestment Period
CLO collateral manager is permitted to actively trade
underlying assets, and uses principal cash ows from
underlying assets to purchase new assets.
Amortization Period
Cash ows from assets are used to
pay down the outstanding notes.
Non-Call Period Ends
CLO equity investor can
renance CLO tranches.
2 years
3–6 months
3–9 months 4–5 years 2–3 years
6 Guggenheim InvestmentsUnderstanding Collateralized Loan Obligations – 2023
Performance Summary of CLOs Issued Before and After the GFC
The combination of diversied, actively managed, senior-secured loan collateral along with sound securitization structures has resulted
in favorable historical ratings performance.
Source: Guggenheim Investments, Standard and Poor’s. Data as of 9.30.2023.
CLO 1.0 CLO 2.0 Default %
Original Rating Category
Original Rating
Count
Default
Count
Original Rating
Count
Default
Count
CLO 1.0 CLO 2.0
AAA 1,540 0 3,639 0 0.0% 0.0%
AA 616 1 2,964 0 0.2% 0.0%
A 790 5 2,449 0 0.6% 0.0%
BBB 783 9 2,230 0 1.1% 0.0%
BB 565 22 1,818 8 3.9% 0.4%
B 28 3 389 11 10.7% 2.8%
Total 4,322 40 13,489 19 0.9% 0.1%
Historical Performance
The combination of diversied, actively managed, senior-
secured loan collateral along with sound securitization
structures has resulted in favorable historical ratings
performance. According to Standard & Poor’s, CLO 1.0s
(CLOs that were issued before the GFC) exhibited strong
credit performance during the nancial crisis and produced
a very small number of lifetime defaults. CLO 2.0s (CLOs
issued after the GFC) feature numerous additional credit
improvements compared to their pre-crisis counterparts.
First, rating agencies now require that CLOs carry
substantially more overcollateralization than their pre-crisis
counterparts. Second, whereas pre-crisis CLOs were able
to make meaningful investments in subordinated bonds
and other structured credit instruments, post-crisis CLOs
are collateralized almost exclusively by senior secured
bank loans. Third, post-crisis CLOs’ documentation is
much more investor friendly, for example, by shortening
the trading period during which the manager is able to
actively manage the loan portfolio, and limiting extension
risk for CLO securities. Due to their enhanced collateral and
structural improvements, CLO 2.0s experienced even better
performance than CLO 1.0.
CLOs’ historically low default rate across the ratings
spectrum compares favorably to corporate debt.
7Guggenheim Investments Understanding Collateralized Loan Obligations – 2023
CLOs Are the Largest Leveraged Loan Investor
CLOs purchased 69 percent of all new issue leveraged loans in 2022, and own 70 percent of the overall leveraged loan market.
Source: Guggenheim Investments, S&P LCD, Bank of America. Data as of 9.30.2023.
0%
10%
20%
30%
40%
50%
60%
70%
80%
$ 200bn
$400bn
$600bn
$800bn
$1,000bn
$1,200bn
$1,400bn
$1,600bn
U.S. Institutional Loan Market (LHS) U.S. CLO Market (LHS) % CLO Share (RHS)
$0bn
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023
YTD
Source: Guggenheim Investments, Standard and Poor’s. Data as of 9.30.2023.
CLO 1.0 + 2.0CLO 1.0 + 2.0 Corporate
Original Rating Category Original Rating Category 5 Year5 Year 10 Year10 Year
AAA 0.00% 0.42% 0.83%
AA 0.03% 0.41% 0.96%
A 0.15% 0.64% 1.65%
BBB 0.30% 1.79% 3.93%
BB 1.26% 7.26% 13.35%
B 3.36% 17.4 8% 24.79%
CLO and Corporate Bond Cumulative Defaults
CLOs’ historically low default rate across the ratings spectrum compares favorably to corporate debt.
Investor Sponsorship
The CLO marketplace has evolved since the GFC. The CLO
market grew from a post-crisis trough of $263 billion to $970
billion as of September 2023, according to Bank of America
data. Many new investors were attracted to the strong histor-
ical credit performance and oating-rate coupon following
the GFC. The CLO market has grown in-step with the bank
loan market and expanded at a quicker pace than other cred-
it market sectors.
8 Guggenheim InvestmentsUnderstanding Collateralized Loan Obligations – 2023
Prior to the GFC, investor sponsorship was largely dominated
by hedge funds, structured investment vehicles, and Wall
Street trading desks. However, post-crisis regulation has
all but eliminated these highly leveraged investor types.
Today’s CLO investor base is primarily composed of
large institutional asset managers, banks, and insurance
companies. These investors do not employ the high leverage
strategies of the pre-crisis investor base and, as a result, are
less prone to the forced selling that arises from mark-to-
market volatility and margin call pressures.
Source: Guggenheim Investments, Bank of America. Data as of 6.30.2022.
Investor Types
Rating Outstanding
Insurance Banks
Japanese
Banks
Asset Managers /
Hedge Funds
AAA $527bn 17% 35% 19% 28%
AA $103bn 50% 50%
A $55bn 64% 36%
BBB $53bn 49% 51%
BB $38bn 20% 80%
Equity $97bn 20% 80%
Investor Composition of CLOs
Today’s CLO investor base is primarily composed of large institutional asset managers and insurance companies. These investors do not
employ the high leverage strategies of the pre-crisis investor base and, as a result, are less prone to the forced selling that arises from
mark-to-market volatility and margin call pressures.
Source: Guggenheim Investments, Bank of America. Data as of 12.31.2022.
Secondary trading volumes in investment-grade CLO
tranches have been fairly stable year over year, and
underscore the ability of risk to change hands even in
challenging market environments. The buy-and-hold
oriented sponsorship of investment-grade CLO tranches can
be observed in the lower level of turnover. In contrast, non
investment-grade CLO tranche trading volumes are higher
and more variable, highlighting their more opportunistic
and risk-tolerant buyer base.
9Guggenheim Investments Understanding Collateralized Loan Obligations – 2023
Investment-Grade Turnover (%) Below Investment-Grade Turnover (%)
10%
20%
30%
40%
50%
60%
2015 2016 2017 2018 2019 2020 2021 YTD 2023
Turnover (%)
0%
2022
Trading Volumes of CLOs: Investment Grade and Below Investment Grade Turnover Breakdown
Secondary trading volumes in both investment-grade and non-investment-grade CLO tranches underscore the ability of risk to change
hands even in challenging market environments.
Source: Guggenheim Investments, FINRA. Data as of 9.30.2023.
Investing in CLOs
CLOs have several features that make them an integral
component of Guggenheim’s xed-income strategies.
In addition to their investor-friendly structural protections
and historical credit performance, one of the most important
characteristics of CLOs is their oating-rate coupon, which
helps insulate bond prices from volatile interest rates. Fixed-rate
securities decline in value as interest rates rise and investors
discount the value of the xed-rate bonds’ relatively low
coupons. However, the coupons on oating-rate securities
such as CLOs adjust based on the current short-term interest-
rate environment. As a result, oating-rate securities’ prices
tend to be more stable in volatile interest-rate environments
than those of their xed-rate counterparts.
Investing in CLOs is not without risk. As with other securities,
CLOs are subject to credit, liquidity, and mark-to-market risk,
and the basic architecture of CLOs requires that investors must
understand the waterfall mechanisms and protections as well
as the terms, conditions, and credit prole of the underlying
loan collateral. Thus, the relative value determination for a
CLO simultaneously considers potential returns relative to
other securitized and corporate xed-income sectors as well
as its pricing relative to other short-duration options.
Capturing opportunities in the CLO market requires the
expertise to perform bottom-up research on individual
bank loans in the underlying collateral pool. Because CLOs
routinely have over 200 issuers in their collateral pools,
investment managers must have signicant corporate credit
research capabilities to fully evaluate the underlying credit
risk in each CLO.
The importance of understanding a CLO’s structural
characteristics cannot be underestimated. Two CLOs with
the identical collateral assets may perform dierently due to
structural dierences. The legal documentation that governs
a typical CLO can be in excess of 300 pages, and a high degree
of expertise and consistent market presence are required to
analyze these documents and discuss key terms with managers
looking to access the market. The ability to access the value in
CLOs becomes available to investors with the appropriate mix
of credit research, structuring experience, and legal expertise.
10 Guggenheim InvestmentsUnderstanding Collateralized Loan Obligations – 2023
The Guggenheim Approach
Guggenheim’s approach to investing in CLOs is consistent
with our process for all our xed-income investments. With
CLOs, the Guggenheim investment process starts with
a bottom-up fundamental approach to CLO structures.
Guggenheim brings to bear its extensive research insights
across a broad spectrum of the bank loan market and the
structuring and legal expertise necessary to understand the
nuances of each individual CLO investment opportunity.
Collateral, structure, and manager attributes are evaluated,
and stress testing and scenario analyses are performed.
Research is augmented by our in-house legal team and by
the obligor-level credit views of our corporate credit team.
Investments are integrated into portfolio strategies by
considering relative value, risk, and sector targets, as well as
the risk-adjusted return potential evaluated from a long-term
holding period point of view.
11Guggenheim Investments Understanding Collateralized Loan Obligations – 2023
Important Notices and Disclosures
GLOSSARY OF TERMS
Basis Point: A unit of measure used to describe the percentage changes in the value or rate of an instrument. One basis point is equivalent to 0.01 percent.
First Lien: A security interest in one or more assets that lenders hold in exchange for secured debt financing. The first lien to be recorded is paid first.
Mark-to-Market: A measure of the fair value of an asset or liability, based on current market price.
Mezzanine Financing: A hybrid of debt and equity financing that is typically used in the expansion of existing companies.
Second Lien: Debts that are subordinate to the rights of more senior debts issued against the same collateral or portions of the same collateral.
Secured Overnight Financing Rate (SOFR): A broad measure of the cost of borrowing cash overnight collateralized by Treasury securities.
Structured Investment Vehicles: Pools of investment assets that attempt to profit from credit spreads between short-term debt and long-term structured finance products such as asset-
backed securities.
Tranche: Related securities that are portions of a deal or structured financing, but have dierent risks, return potential and/or maturities.
Waterfall: A hierarchy establishing the order in which funds are to be distributed.
This material is distributed or presented for informational or educational purposes only and should not be considered a recommendation of any particular security, strategy or investment
product, or as investing advice of any kind. This material is not provided in a fiduciary capacity, may not be relied upon for or in connection with the making of investment decisions, and does
not constitute a solicitation of an oer to buy or sell securities. The content contained herein is not intended to be and should not be construed as legal or tax advice and/or a legal opinion.
Always consult a financial, tax and/or legal professional regarding your specific situation.
This material contains opinions of the author or speaker, but not necessarily those of Guggenheim Partners, LLC, or its subsidiaries. The opinions contained herein are subject to change without
notice. Forward-looking statements, estimates, and certain information contained herein are based upon proprietary and non-proprietary research and other sources. Information contained
herein has been obtained from sources believed to be reliable, but are not assured as to accuracy. Past performance is not indicative of future results. There is neither representation nor warranty
as to the current accuracy of, nor liability for, decisions based on such information. No part of this material may be reproduced or referred to in any form, without express written permission
of Guggenheim Partners, LLC.
Investing involves risk, including the possible loss of principal. Investments in bonds and other fixed-income instruments are subject to the possibility that interest rates could rise, causing
their value to decline. Investors in asset-backed securities, including mortgage-backed securities, collateralized loan obligations (CLOs), and other structured finance investments, generally
receive payments that are part interest and part return of principal. These payments may vary based on the rate at which the underlying borrowers pay o their loans. Some asset-backed
securities, including mortgage-backed securities, may have structures that make their reaction to interest rates and other factors dicult to predict, causing their prices to be volatile. These
instruments are particularly subject to interest rate, credit and liquidity and valuation risks. High-yield bonds may present additional risks because these securities may be less liquid, and therefore
more dicult to value accurately and sell at an advantageous price or time, and present more credit risk than investment-grade bonds. The price of high-yield securities tends to be subject
to greater volatility due to issuer-specific operating results and outlook and to real or perceived adverse economic and competitive industry conditions. Bank loans, including loan syndicates
and other direct lending opportunities, involve special types of risks, including credit risk, interest rate risk, counterparty risk, and prepayment risk. Loans may oer a fixed or floating interest
rate. Loans are often generally below investment grade, may be unrated, and can be dicult to value accurately and may be more susceptible to liquidity risk than fixed-income instruments of
similar credit quality and/or maturity.
Applicable to United Kingdom investors: Where this material is distributed in the United Kingdom, it is done so by Guggenheim Investment Advisers (Europe) Ltd., a U.K. Company authorized
and regulated by the Financial Conduct Authority (FRN 499798) and is directed only at persons who are professional clients or eligible counterparties for the purposes of the FCA’s Conduct
of Business Sourcebook.
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eligible counterparties for the purposes of the FCA’s Conduct of Business Sourcebook.
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of Guggenheim Partners Middle East Limited, the Authorized Firm regulated by the Dubai Financial Services Authority. This report is intended for qualified investor use only as defined in the
DFSA Conduct of Business Module.
©2023, Guggenheim Partners, LLC. All rights reserved. Guggenheim, Guggenheim Partners, and Innovative Solutions. Enduring Values. are registered trademarks of Guggenheim Capital,
LLC. No part of this article may be reproduced in any form, or referred to in any other publication, without express written permission of Guggenheim Partners, LLC.
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Guggenheim Investments
Guggenheim Investments is the global asset management
and investment advisory division of Guggenheim Partners,
with more than $218 billion
1
in total assets across xed
income, equity, and alternative strategies. We focus on the
return and risk needs of insurance companies, corporate and
public pension funds, sovereign wealth funds, endowments
and foundations, consultants, wealth managers, and high-
net-worth investors. Our 250+ investment professionals
perform rigorous research to understand market trends and
identify undervalued opportunities in areas that are often
complex and underfollowed. This approach to investment
management has enabled us to deliver innovative strategies
providing diversication opportunities and attractive
long-term results.
Guggenheim Partners
Guggenheim Partners is a diversied nancial services
rm that delivers value to its clients through two primary
businesses: Guggenheim Investments, a premier global
asset manager and investment advisor, and Guggenheim
Securities, a leading investment banking and capital
markets business. Guggenheim’s professionals are based
in oces around the world, and our commitment is to
deliver long-term results with excellence and integrity while
advancing the strategic interests of our clients. Learn more
at GuggenheimPartners.com, and follow us on LinkedIn and
Twitter @GuggenheimPtnrs.
1. Guggenheim Investments Assets Under Management are as of 9.30.2023 and include leverage of $15.9bn. Guggenheim Investments represents the following aliated investment management
businesses of Guggenheim Partners, LLC: Guggenheim Partners Investment Management, LLC, Security Investors, LLC, Guggenheim Funds Distributors, LLC, Guggenheim Funds Investment
Advisors, LLC, Guggenheim Partners Advisors, LLC, Guggenheim Corporate Funding, LLC, Guggenheim Partners Europe Limited, Guggenheim Partners Japan Limited, GS GAMMA Advisors,
LLC, and Guggenheim Partners India Management. Securities delivered by Guggenheim Funds Distributors, LLC.
Guggenheim’s Investment Process
Guggenheim’s xed-income portfolios are managed by a
systematic, disciplined investment process designed to
mitigate behavioral biases and lead to better decision making.
Our investment process is structured to allow our best
research and ideas across specialized teams to be brought
together and expressed in actively managed portfolios.
We disaggregated xed-income investment management
into four primary and independent functions—
Macroeconomic Research, Sector Teams, Portfolio
Construction, and Portfolio Management—that work
together to deliver a predictable, scalable, and repeatable
process. Our pursuit of compelling risk-adjusted return
opportunities typically results in asset allocations that
dier signicantly from broadly followed benchmarks.
For more information, visit GuggenheimInvestments.com.
