Why investors are reassessing securitised credit structures like CLOs

VTA

While many corners of fixed income have struggled with rising rates and uncertain credit conditions, a corner of the market has been regaining investor interest. Securitised credit, particularly Collateralised Loan Obligations (CLOs), has started to look more relevant to those seeking yield with structural risk controls in place.

CLOs pool together portfolios of senior secured loans made to sub-investment-grade companies, which are then packaged into tranches with different risk-return profiles. The structure allocates repayments from the underlying loan pool in a strict order of priority, with senior tranches receiving principal and interest first, and equity tranches absorbing losses last. CLOs generally reset their coupons in line with benchmark rates, offering a natural hedge against rising interest rates, which contrasts with the pressure seen across traditional fixed-income portfolios. In 2025, certain parts of the securitised credit market delivered competitive returns while managing to sidestep some of the duration risk that hit longer-dated corporate and government bonds.

Beyond the technical structure, the underlying loan portfolios have also proven more robust than some had expected. Default rates among leveraged loans have remained moderate, and the senior secured nature of these assets offers an additional layer of investor protection. CLOs are actively managed, allowing managers to rotate exposure and manage credit quality across cycles.

Volta Finance Ltd (LON:VTA) is a closed-ended limited liability company registered in Guernsey. Volta’s investment objectives are to seek to preserve capital across the credit cycle and to provide a stable stream of income to its Shareholders through dividends that it expects to distribute on a quarterly basis.

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