Nah it's more like 4-5 times, the loans are 1st lien and securitized on company assets unlike say corporate bonds or preferred shares. What do you mean "managed by normal people on the street" , you are just buying shares in a closed end investment vehicle , not managing anything , yes it's levered , so are some types of ETF. Not sure about US but most countries you have to certify as a sophisticated investor to buy more complex investments like companies investing in CLO's......
@@jwg9338 when bank is in trouble, favilities like BTFD will exist to save everyone. When CLO as a sector will be in trouble in recession, who's gone save this?
Fascinating discussion in the CLO, private credit, BDC space takes me back to the 80’s Junk Bond market where the logic was that the high yield more than covers the losses and you still end up earning a higher return than say Treasuries or Munis. So for many of us this is the holy grail where we can earn SOFR plus 300 or more after fees. I’m sure many people approaching or in retirement would be happy with that.
Thank you for this - it was very thought-provoking, and Jack Farley was excellent as usual. One question - could you (maybe in an upcoming show) - explain the implications of investing in ECC given that it is a closed-ended fund? I ask this as someone obviously interested in the div yields on ECC. As an international investor, however, I am not sure what I'd be getting into by investing in a closed-ended fund. Thank you.
and the short answer is not really. Banks owned CLOs and they suffered impairments in 2008 but in the interview Majewski says that ultimately the equity tranches ended up performing very well as they were able to buy distressed assets on the cheap with par dollars. Whereas CDOs got destroyed. CDOs in question owned subprime mortgages where CLOs own loans to companies
Tiny chunks of large loans to huge companies. Secured. Variable. Uses locked-in capital, so avoids the vulture capital risk to the borrower but does pass through the capricious central bank actions. I learned something. [Then I got a juvenile giggle near the end when 40s and BBC and 150% full coverage came up. Yay, context.]
They borrow money to fund their investments and the interest they pay on those loans is part of the expense so it's really high right now since rates are high.
@@BlockworksHQ There's an AI video and voice ad of Saylor and the "CEO of Ripple" (separate ads but same scam) claiming to be giving away Crypto. It's pretty convincing.
Fuck it, im buying some JAAA puts. This market is as dependent on the fed put and increasing equity prices as CDOs were dependent on an increasing mortgage market
This channel should show the stats of the asset managers and subscription sellers that come on here. His ecc fund is down 51% since its inception in 2014 Spx is up 142% over that time 😂
the publicly listed vehicle (ECC) has performed 87% since inception in 2014, including dividends. crushed HYG and BKLN which over same time period have yielded 32% and 34%, respectively.
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10 times levered loan product managed by normal people on the street? This sounds extremely safe 😂
it's better than banks!
Nah it's more like 4-5 times, the loans are 1st lien and securitized on company assets unlike say corporate bonds or preferred shares. What do you mean "managed by normal people on the street" , you are just buying shares in a closed end investment vehicle , not managing anything , yes it's levered , so are some types of ETF. Not sure about US but most countries you have to certify as a sophisticated investor to buy more complex investments like companies investing in CLO's......
Should be far more worried about what this discussion means for banks.
@@jwg9338 when bank is in trouble, favilities like BTFD will exist to save everyone. When CLO as a sector will be in trouble in recession, who's gone save this?
Banks are levered too
Good interview and an articulate logical guest not prone to hyperbole. Thanks for picking up this topic and Thomas.
Fascinating discussion in the CLO, private credit, BDC space takes me back to the 80’s Junk Bond market where the logic was that the high yield more than covers the losses and you still end up earning a higher return than say Treasuries or Munis. So for many of us this is the holy grail where we can earn SOFR plus 300 or more after fees. I’m sure many people approaching or in retirement would be happy with that.
Good information on CLOs
Really enjoyed this interview. Lots of good insight on CLO/BDC world.
Excellent interview and content!!
Thank you for this - it was very thought-provoking, and Jack Farley was excellent as usual. One question - could you (maybe in an upcoming show) - explain the implications of investing in ECC given that it is a closed-ended fund? I ask this as someone obviously interested in the div yields on ECC. As an international investor, however, I am not sure what I'd be getting into by investing in a closed-ended fund. Thank you.
Excellent information here 👍
Isn't this CLO exactly same stuff that already caused lehman brothers crash and following credit crisis?
we address in the interview...
and the short answer is not really. Banks owned CLOs and they suffered impairments in 2008 but in the interview Majewski says that ultimately the equity tranches ended up performing very well as they were able to buy distressed assets on the cheap with par dollars. Whereas CDOs got destroyed. CDOs in question owned subprime mortgages where CLOs own loans to companies
Tiny chunks of large loans to huge companies. Secured. Variable. Uses locked-in capital, so avoids the vulture capital risk to the borrower but does pass through the capricious central bank actions. I learned something. [Then I got a juvenile giggle near the end when 40s and BBC and 150% full coverage came up. Yay, context.]
Thhanks guys!!
I got alot of value out of this, thanks for making it happen
Why is the expense ratio 9% for your ECC fund
Wtf lol, that's insane
OXLC (a similar fund) is 13.84%! Why would anyone invest in these things. A DITM covered call on SPY would pay you a much higher overall return.
They borrow money to fund their investments and the interest they pay on those loans is part of the expense so it's really high right now since rates are high.
48.10 Jack, do you know if there's any data available on his claim that loans transferred out of banks have outperformed?
He sounded like Jeff Goldblum :)
The two CLO equity tickers I know of are ECC (one the guest works for) and OXLC. Does anybody know of any other CLO equity tickers?
CLO equity is worth $0.
@@JamesG1126 Not what I asked but I bet you really wanted to say that.
EIC and VTA (Volta Finance).
@@ejbarraza VTA doesn’t appear to be a valid US ADR (ticker). I thought EIC was a debt fund.
CCIF
Appears to be a good way for the small retail investor to get screwed,
How? it's been a lot of years.
Yea and who ensures them? Please do tell i am ready to short
Saylor ad is a scam.
what Saylor ad?
@@BlockworksHQ There's an AI video and voice ad of Saylor and the "CEO of Ripple" (separate ads but same scam) claiming to be giving away Crypto. It's pretty convincing.
We reject history
I’ll come back in March to see how this aged.
What are your thoughts now?
@@TheRealRaggedyAndy Election year.
@@Ourpetsheadsarefallingoff Give us more. lol
@@TheRealRaggedyAndystill killing it Tiger?
I invest in ECC great product.Happy investing/stacking.
More or less risk than yieldmax YMAG?
Fuck it, im buying some JAAA puts. This market is as dependent on the fed put and increasing equity prices as CDOs were dependent on an increasing mortgage market
What is clos?
CDO = CLO ???
How much do you wanna bet that CLOs will be the next 2008 😂
Sounds like a bomb waiting to explode...
This channel should show the stats of the asset managers and subscription sellers that come on here. His ecc fund is down 51% since its inception in 2014 Spx is up 142% over that time 😂
Huh? Are you not looking at total returns? It's averaged 6.25% annualized return since 2014.
You know you can't just look at price right?
@xmj202 look at total returns (including dividends), not just price.
the publicly listed vehicle (ECC) has performed 87% since inception in 2014, including dividends. crushed HYG and BKLN which over same time period have yielded 32% and 34%, respectively.
What's your stats so far?
Look at his sleeve....JP Morgan!!!
So????