CLO managers are responsible for extensive due diligence on investment-related functions, such as credit strategy and performance measurement, as well as non-investment functions in the middle and back-office where demands are especially challenging. However, with the implementation of automation technology, these activities can be less burdensome by helping to reduce manual work, improve control and mitigate operational risk. Let’s explore how.

In the middle and back office, activities are typically managed by internal teams along with external providers for technology, portfolio accounting, and specialized data. Here, functions are often reviewed concerning several factors:

  • Operating model, including staffing, systems utilized, and outsourcing
  • Loan operations and settlement process
  • Marking of positions and valuations that leverage third-party sources and agents
  • Reconciliation with the trustee, including cash, portfolio covenants, and trading reconciliation
  • Periodic reconciliation reporting

For managers, challenges become most intense at month-end, when the fiduciary trustee – who also requires significant oversight – receives updates on cash, holding, ratings, and positions. On top of this, data points such as WAL, WARF, and many others must be reconciled with the trustee’s tests.

By moving these workflows into a more digital, automated environment, managers can significantly reduce operational risk by establishing control over the challenging and chaotic month-end process, increasing accuracy by identifying inconsistencies and improving compliance testing, and strengthening confidence in due diligence for the middle and back office.

With these efficiencies in mind, managers should seek a solution that is equipped to detect anomalies within the monthly and quarterly reporting cycles and integrate seamlessly with a variety of systems to help uncover inaccuracies with both standardized and custom control checks. Other features to look for in a solution include:

  • Reconciliation powered by AI/ML
  • Advanced workflow management
  • Embedded trustee communication
  • Comprehensive integration

IVP NAV Solution is a complete CLO oversight and control solution that leverages an intelligent analysis and reconciliation framework to detect CLO anomalies within monthly/quarterly cycles. It offers a robust, fully automated architecture that integrates with internal and external systems to help CLO managers uncover inaccuracies through standardized and customizable control checks.