The industry-specific terminology associated with CLOs can give the impression of a complexity to the product that belies reality, and, in our view, is unhelpful to the Volta investment case. Accordingly, in this note, we give investors a simple guide to what CLOs are, the benefits they provide, and how Volta is taking the market opportunities. The core of CLOs is uncomplicated cashflows. They are just a pooling of loans into a vehicle, which funds itself by issuing a range of debt and equity. The pool has diversification and credit-enhancement benefits, which result in investors in debt getting a better-than-average risk/return, and investors in equity getting double-digit returns.
