CLO structures are notoriously complex. Manual workflows dominate their administration, and managers must coordinate across multiple systems and counterparties. This slows settlements, increases compliance risks, and stretches human resources. Compared with other financial markets, the CLO space is far behind in automation and data standardization, limiting efficiency and scalability as the market continues to grow.
We spoke with several CLO managers to gather their perspectives, as they seek ways to streamline workflows and automate labor-intensive tasks so they can free up time to focus on portfolio decisions and driving alpha. Across these conversations, several consistent challenges emerged highlighting how modernizing infrastructure and centralizing data can help address them.
Disconnected systems and manual processes hinder data integrity and CLO efficiency
The highly manual and paper-based nature of CLO workflows introduces operational inefficiencies, human error, and other risks. Unlike the straight-through, DTC-like process we see in other markets, CLO settlements still require coordination across multiple parties (e.g. banks, trustees, asset managers etc.) instead of being a single push-button workflow.
Another key challenge is the lack of standardization, particularly the absence of a unified identifier. Each asset can have six or seven identifiers across systems, none of which align. This fragmentation prevents seamless system connectivity and compounds data challenges, making it difficult for managers to have access to real-time compliance monitoring, cash tracking, and performance metrics. Without tailored data ingestion pipelines and rule-based reconciliation workflows, firms struggle to ensure data accuracy and eliminate errors. As a result, many are not audit-ready and lack transparency across holdings, cash, compliance, waterfalls, and test results.
While the industry has adopted technologies to fill these gaps, it hasn’t provided true integration and innovation. The root causes of fragmented infrastructure and inconsistent data remain unchecked.
Why modernization of infrastructure is key for elevating CLO operations
Some CLO managers have attempted to address these issues by adding headcount. But adding more people to manage outdated infrastructure and fragmented data only treats the symptoms, not the root cause.
A more effective solution lies in modern infrastructure capable of transmitting data electronically (e.g. via FpML or blockchain), allowing for global, system-to-system connectivity and eliminating manual intervention. However, this would depend on industry-wide adoption of common standards. Data technology companies, agent banks, and other service providers, may attempt to carve out niches, monetizing better data connectivity or ownership of identifiers. This could pave the way for direct trading and improved execution between managers and agents.
By modernizing the infrastructure, CLO managers will be able to scale efficiently alongside a growing market, further standardize data, and create a more connected ecosystem. This shift would not only eliminate manual friction but also enhance transparency, and reduce operational risks. Crucially, it would allow CLO managers to focus on portfolio decisions with confidence, backed by accurate data and streamlined processes that drive alpha.
To learn more about how Siepe can help streamline CLO workflows and deliver best-in-class portfolio tracking and administration through technology-enabled services and expert support, download our factsheet.
