Portfolio Analytics Wrap: Uncertainty Looms Over 2024 CLO Vintage’s Moneyness for Resets

Despite headline volatility that pushed spreads wider in April, the CLO market has demonstrated notable resilience and adaptivity, with spreads tightening back toward early-year levels even amid record primary issuance.

At such a tight spread level, CLO refinancing options have become increasingly accretive for both managers and equity investors. Many managers have capitalized on this window and extended reinvestment periods for their older vintage deals, better positioning their portfolios to capture future opportunities in an evolving yet constructive credit environment.

According to Octus’ CLO data, as of the end of October, reset transactions accounted for $156.9 billion, or 40.1%, of the $391.3 billion in U.S. broadly syndicated loan CLO primary issuance in 2025. In Europe, resets totaled €39.5 billion, or 43.4%, of the €91.05 billion in total primary volume.

Komal Shahzad, senior vice president of CLO tranche investing at PineBridge Investments, noted that the ongoing loan refinancing wave has been a key driver of reset momentum this year.

“Loans are usually issued with a six-month noncall period,” Shahzad said. “So even though managers have locked in good liability spreads for the next two years of noncall, the underlying loan spreads can compress technically four times through refinancings during these two years. We’ve seen some loan spreads tighten by 20 to 30 bps so far this year, and for 10x-levered deals like CLOs, that would translate to roughly a 2% to 3% hit to equity returns.”

With equity arbitrage under pressure from loan spread compression, CLO new issuance has become less economic, even as triple-A spreads are near their local tights.

Shahzad added that although new issue CLOs tend to look similar on day one in terms of portfolio metrics, performance often diverges meaningfully over time as managers actively trade and reposition their portfolios.

CLO resets, by contrast, are structured with seasoned portfolios that have already gone through their initial noncall periods, giving investors clear visibility into managers’ abilities and portfolio quality. “With our bottom-up credit work, we can really pick and choose our spots in CLO resets,” Shahzad added.

Reset activity has increased diversity in the CLO bond profiles that are available to investors, and resets tend to display a more dispersed range of collateral weighted average spreads and have less portfolio overlap than new issue deals. Resets are often accompanied by portfolio upsizing, which can help dilute weaker credits accumulated over time and thereby improve portfolio metrics to an extent.

In Europe, reset momentum has also gained traction, with more supply coming from older amortizing vintages.

Tikehau reset its 2018-vintage European CLO IV and 2019-vintage CLO V in the third quarter of 2025, upsizing the transactions by €167 million and €135 million, respectively.

“On these amortized deals, the overall profile of the portfolio is weaker because, naturally, the strongest loans pay down first,” Christoph Zens, head of European CLOs at Tikehau, said, emphasizing the importance of portfolio cleanup to restore par and reduce tail risk. “Investors are looking even more carefully than usual at portfolio quality. We probably would have reset or refinanced them earlier, but that would have been in 2022 or 2023 when the market was way too wide for a reset to make sense.”

Reset activity in 2025 has been driven largely by the 2023 and 2021 vintages. According to Octus’ CLO data, 98 CLOs from the 2023 vintage and 63 from 2021 have been reset in the United States so far this year, together accounting for $74.6 billion, or 47.5%, of total U.S. reset volume, with $42.7 billion from 2023 deals and $31.9 billion coming from 2021 deals. In Europe, the figure is comparatively smaller, with €10.03 billion from 24 2023 vintage deals and €2.4 billion from 5 2021 vintage deals, together accounting for 31.3% of total resets.

Triple-A spreads, as a proxy of CLO liability costs, of both the 2023 and 2021 vintages are mapped against the portfolio metrics from Octus’ Portfolio Analytics to examine the relationship between technicals driving spread dynamics and collateral level performance.

In the United States, 2023-vintage deals show a wider dispersion in annualized equity returns, as shown in the scatterplot below. Some transactions, such as Octagon CLO 67 and GoldenTree Loan Management US CLO 17, have delivered returns above 30% (31.81% for the former and 35.20% for the latter), while others have generated less than 3%, including RAD CLO 19 (1.93%) and AGL CLO 2025 (2.11%). Overall, annualized equity returns are generally stronger in deals with tighter triple-A spreads.

For 2021-vintage U.S. deals, the relationship is much more muted, and their annualized equity returns are less dispersed. Most transactions delivered equity returns between 5% and 20%. RR 19 and Madison Park Funding XXXVIII have outstanding returns of over 20%, at 20.81% and 22.98%, respectively.
 

For both vintages, the portfolio-level obligor performance metrics and their relationship with CLO funding costs are shown below. Among these metrics, the collateral free cash flow margin exhibits the strongest correlation with triple-A spreads, with higher margins generally associated with tighter spreads, while collateral net leverage shows the weakest relationship to triple-A spread levels.

In Europe, the sample size is relatively limited, with only 24 2023-vintage deals and five from 2021 reset in 2025, according to Octus’ CLO data. As shown in the chart below, 2023-vintage resets do not exhibit a clear correlation between triple-A spreads and annualized equity returns, and 2021-vintage deals align more closely with the trend observed in the United States, where lower triple-A spreads are generally associated with stronger equity performance.
 

European reset deals have generally delivered higher equity returns than their U.S. counterparts, with several 2023-vintage transactions achieving returns above 30%. Blackstone’s Glenbrook Park CLO and Wilton Park CLO, as well as ICG Euro CLO 2023-1, stood out with annualized equity returns of 35.58%, 35.36%, and 33.36%, respectively.

Both 2023 and 2021-vintage deals were reset with triple-A discount margins ranging between 120 bps and 149 bps, with Cairn CLO XVII resetting tightest, at 120 bps, and Barings Euro CLO 2023-1 resetting widest, at 149 bps.

“Compared with the 2023 vintage, which has been well in the money, most 2024-vintage deals issued in the first and second quarters with coupons in the 150 bps area are definitely in the money,” said Shahzad at PineBridge. “However, those priced with coupons between 130 and 140 bps may not be in the money over the next six months, and it’s difficult to call where markets will be at that time.”

The charts below contain 193 2024-vintage U.S. CLO deals with noncall periods ending in 2026, along with 26 European transactions.

Among the U.S. cohort, 116 deals were priced with triple-A spreads tighter than 150 bps, and 66 priced tighter than 140 bps. Annualized equity returns for these deals generally fall between 10% and 25%, with three transactions delivering returns above 30%. Silver Point CLO 5 and Silver Point CLO 6 stand out, posting equity returns of 30.56% and 37.24%, respectively.

Cole Gauthier, senior vice president of CLO capital markets and analytics at Beach Point Capital, told Octus that his firm is currently monitoring its 2021-vintage deal, Sandstone Peak, which will exit its noncall period in January 2026, and its 2024-vintage deal, Sandstone Peak III, which will become callable in April 2026.

After a 79 bps saving on triple-A spreads achieved through resetting Beach Point’s 2023-vintage CLO Sandstone Peak II, Gauthier said he is excited about potential reset opportunities in 2026.

“It’s important to note that when it comes to resets, day-one arbitrage isn’t necessarily make-or-break,” Gauthier said. “If we think we can lock in spreads for two to five years at a good level, a reset will still be worthwhile, even if asset spreads are compressed.”

Triple-A spread levels are not just a function of the market technicals but are also greatly influenced by the underlying collateral, according to Tikehau’s Zens. “It’s about tying out the current portfolio versus the target portfolio, which can involve quite a bit of heavy lifting from the manager to reconcile cash balances, trading plan execution and repayments,” he said.

Zens told Octus that European mezzanine tranches are currently close to their historical tights, while the triple-A tranche is the only tranche currently pricing outside of its historical tightest level.

Market data supports this view. The current spread differential between triple-As and double-Bs is around 380 bps in the United States and 405 bps in Europe, according to BNP Paribas, both standing in the very low percentile range of the historical spread differential, which is roughly 4% in the United States and 6% in Europe.

PineBridge’s Shahzad explained that the recent tightening lower in the capital stack has been partly driven by an unusually flat credit curve. “The credit curve has gotten too flat,” she said. “We’ve seen investors who would typically buy triple-As move down into double-As because triple-As have become too tight for them.”

The shift in investor behavior has redirected demand further down the capital stack, compressing spreads in mezzanine tranches. However, at the same time, the relatively slower tightening at the top of the stack is allowing the flat credit curve to correct itself.

“When we construct our CLO tranche investment portfolios, we are not necessarily just looking at tier 1 paper at the tightest spread level all the time,” Shahzad said. “Some of those overseas institutions that anchor triple-As typically like cleaner new issues, and sometimes they choose to opt out of the reset deals. This leaves pockets of supply that aren’t perfectly absorbed by everyone in the market, effectively putting a floor under further spread tightening.”

Looking ahead, Shahzad noted that with anticipated spread decompression across the CLO capital stack and the relatively tight levels of 2024-vintage deals, not every refinancing or reset eligible transaction will necessarily be in the money. “We may just see refinancings at the top of the capital stack,” she said, “but like everything else in this market, it’s TBD.”