Data and AI in the CLO Space: 3 Key Ideas from Opal Group’s 2023 CLO Summit

By: Alex Lambiotte

Senior Product Specialist
December 21, 2023

This month, Allvue attended and sponsored Opal Group’s CLO Summit across three days in Dana Point, California. The event brought together investors, issuers, underwriters, rating agencies, lawyers, accountants, and service providers from the CLO space to meet, mingle, and discuss the top trends affecting the industry. 

Allvue is the trusted provider for 8 of the 10 largest CLOs in the industry

As a top software provider in the CLO space, Opal Group’s CLO Summit is a key industry event for our organization. Allvue is the trusted software provider for 8 of the 10 largest CLOs in the industry, and the conference is an opportune time for us to convene with valued clients to share our knowledge and hear others’ experiences on topics including regulation, technology adoption, data strategy, and more. 

I even had the honor to participate in two panels during the event. The first panel covered technology and integration, sitting alongside industry peers from the likes of U.S. Bank, Siepe, BNY Mellon, HalseyPoint Asset Management, KopenTech, and Wilmington Trust; while the second panel covered technology decision-making for CLO managers, participating with SS&C, Ai SPARK, Broadridge, Deutsche Bank, Semeris, and again U.S. Bank. 

From my time spent connecting with CLO managers and other tech providers during the conference, as well as the discussions had on each panel, here are my top takeaways from Opal Group’s 2023 CLO Summit. 

“We use over 20 different OMS systems, including market standard Allvue.”

Head of U.S. Middle Office, Large Global Bank Headquartered in the Midwest 

#1 Reliable data is a necessary foundation for true portfolio optimization and digital transformation of the market 

Data collection and digestion are key themes for CLO managers.  Many are motivated to draw actionable insights from the large quantities of data their operations create, as well as from the third-party data streams they bring in from other providers.  

Currently, designing a strong data strategy is a time-consuming, resource-heavy, ongoing process. Perhaps the most crucial element to prioritize is the integrity of the data you’re bringing into a dedicated environment or data warehouse. If you’re not confident in the data you bring in, you can’t be confident in the insights it eventually provides you. Over time, as technology solutions and data scraping advances even further, this step will become more automated, and easier to ensure. 

Allvue’s Portfolio Optimizer was constructed with this idea in mind – providing a tool to make investment decisions from high-quality credit and portfolio information. This cutting-edge technology helps to identify ideal investment opportunities and place them in the context of your portfolio,including full pre-trade and post-trade compliance via a seamless workflow. 

#2: At the same time, there is no one-size-fits-all data strategy for credit managers 

Everyone’s eager to leverage data in a way that works for them – but it’s important not to get caught up in another manager’s approach. The CLO space might be niche, but plenty of diversity exists in how managers approach data and decide what kind of insights they need. For example, one CLO might be focused on pulling out insights from unstructured data for private loans, while another is focused on public loans, while another is strictly prioritizing an ESG view on their loan portfolios.  

These data digestion needs could look vastly different from borrower to borrower, so while there are certainly data collection and storage best practices to follow, firms should follow their own needs rather than getting caught up in doing it all and, in the end, achieving little progress. For software providers, it’s up to us to remember this need for customization in the technology and service we provide. For managers, it’s up to you to take advantage of the technology and find the right provider that can speak your language and understand your niche data needs.   

#3 Look to realistic applications of AI and machine learning for the current moment 

As discussed on one panel, AI is a hot topic in many industries, and the CLO market is no exception. However, while the term “AI” gets thrown around often, it’s important to keep in mind that there currently aren’t any real AI applications that actually mimic human intelligence – for any industry, let alone ours. That isn’t to say the industry won’t one day see true artificial intelligence applications benefit the CLO space, but in the meantime, machine learning use cases are much more accessible and realistic for managers to put to use in our current day. For example, Optical Character Recognition (OCR) holds exciting promise for creating efficiencies in CLO data collection, when scraping credit agreements or indentures, facilitating automation, and mitigating challenges arising from some of the manual nature of CLO operations. 

Additionally, the rise of generative AI has both direct and indirect positive impacts on credit managers. While managers see beneficial use cases for their own operations, perhaps such as automated activity processing, or streamlined data capture, I believe that these AI use cases also benefit service providers, enabling them to be more productive and pass the resulting cost or time savings down to the managers they serve. 

Learn more about why Allvue is a leading solution for CLO managers 

At Allvue, we’re watching closely for the impact of data, AI, and emerging technologies on the operations and investment activities of CLO managers. We’re committed to being at the forefront of applying these tools to make an impact and tackle the biggest challenges CLO managers face. 

Learn how Allvue is helping CLO managers and loan managers streamline workflows from across the lifecycle – from portfolio management to compliance and investment accounting – via our award-winning solutions. Reach out today to learn how Allvue can help you prepare for the future of loan market data management. 

More About The Author

Alex Lambiotte

Senior Product Specialist

Alex is a senior product specialist leading the solutions engineering team for Allvue's credit solutions. He has been at Allvue Systems for 6 years. Alex focuses on building out the existing client base and use cases of Allvue's credit capabilities, working closely with the sales and engineering teams. He is a graduate of Northeastern University, with a BS in Industrial Engineering.

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