With the U.S. Federal Reserve (the Fed) announcing it is raising interest rates to fight inflation, insurers, who often have significant allocations to fixed income, may want to consider investment strategies that can take advantage of rising rates. One option to consider is collateralized loan obligation (CLO) securities.
CLO securities feature interest rates that can adjust with market interest rates, a valuable feature should the Fed continue to raise rates through 2023 as it has suggested. CLO securities also offer competitive yields to securities of similar quality as well as historically lower default rates.
Paul Norris, Head of Structured Products at Conning, and Gretchen Lam, a senior portfolio manager at Octagon Credit Investors, a Conning affiliate focused on the CLO and bank loan market, explain the current opportunities in CLO securities for insurers in our latest Viewpoint “CLOs: Helping Insurers Manage Duration Risk Amid Rising Interest Rates.”