Principles & Approach

We mainly manage portfolios of institutional clients and mutual funds that invest primarily in the equity of CLOs. CLOs by nature are Asset Backed Securities (ABS). The asset side of ABS structures are generally a pool of claims. Due to the large size and high diversification the pools tend to be static. For this reason the lowest rated or unrated tranche will not carry any alpha component and may only perform due to good selection or timing of the pool.

In this respect CLOs are different because the portfolio of senior secured loans is actively managed and carry for this reason a sometimes significant Alpha component. The difference of CLOs issued in the same year under similar market conditions with the same reinvestment period may be very large (please see our chart in 2.4.The Role of the CLO Manager).

Given our research effort it is our job to distinguish between good and bad.

Our principles are:

  • We only engage in assets we understand
  • We believe a profound data base is the basis for good decisions
  • We know knowledge beats luck and intuition
  • Continuous investment success is earned by hard and consequent work
  • Rigorous and understandable processes are required to add transparency to every decision

Our approach dates back to 1999. We learned that only conscious dealing with risks of any kind specially in the credit sector requires a high degree of monitoring, reassessment as well as a clear defined risk management process.

Our proprietary data base is at the heart of our portfolio management, the selection process and risk control. In 2008, after finding consistent inaccuracies in trustee reports we built up the Data Collection and Research teams to a level where we're able to "clean" this data. Although we've informed the trustees, these errors continue. This larger team allows us to invest with full due diligence rather than using data of doubtful origin. We feel confident that we are able to fulfill our contractual duties with the teams we've built up.