Cloud 9fin Tranche Talk — CLO portfolio trading and allocating in a tough market with OHA’s Tommy Wong
Sep 22, 2025
Tommy Wong, a seasoned partner and portfolio manager at Oak Hill Advisors with over 20 years in the loan market, joins the conversation to dissect the current CLO landscape. He elaborates on the implications of macroeconomic shifts, such as rate easing and growth dynamics. Tommy shares insights on credit selection in a low-arb market and the impact of mergers and acquisitions on loan supply. He emphasizes a cautious investment mindset, highlighting the importance of practical trading strategies and sector risk management.
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Use Bond Buckets Conservatively
- Avoid routinely using the bond bucket offensively because it creates asset-liability mismatch in CLOs.
- Use bond buckets defensively to manage duration and volatility when needed.
Long-Term Liability Optionality Matters
- Low spot arbitrage doesn't preclude attractive long-term CLO equity returns because liabilities and optionality matter.
- Locking long-term cheap financing now can expand arb over the life of a CLO when reinvestment opportunities arise.
Prioritize Lower Asset Beta Over Small Spread Gains
- Don't chase tiny incremental spread in tight markets at the expense of higher asset beta and credit risk.
- Instead, consider making portfolios more conservative now to protect against future decompression.