hard · Debt Capital Markets bond-instruments-structures

A CLO equity investor's return is primarily derived from which component of the structure?

1. The recurring management fees that the loan originators remit into the structure.
2. The principal recoveries collected from defaulted loans within the underlying collateral pool.
3. A fixed senior coupon, paid ahead of the Class A rated tranche, that accrues at a stated contractual rate.
4. The excess spread between the loan portfolio's interest income and the cost of the rated debt tranches.

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