The latest generation of European CLOs may expose investors to a risk that didn’t exist in most collateralized loan obligations issued before the financial crisis: fluctuations in foreign exchange rates. 

A scarcity of euro-denominated loans has forced managers of new European CLOs to look at other kinds of collateral, including loans denominated in sterling. And in some cases, managers may not be hedging against changes in the exchange rate between sterling and the euro, Fitch Ratings warned in a May 20 report.

Subscribe Now

Access to a full range of industry content, analysis and expert commentary.

30-Day Free Trial

No credit card required. Access coverage of the securitization marketplace, including breaking news updated throughout the day.