Building diversified portfolios with CLOs

Collateralized loan obligations (CLOs) offer investors enhanced income, diversification and lower default risk compared to traditional corporate bonds. Once available only to institutional investors, CLOs are now gaining attention from investors who recognize the unique benefits of this asset class.

What are CLOs?

CLOs are diversified, actively managed portfolios of broadly syndicated senior loans issued by corporate borrowers. These are pools of loans that are securitized or repackaged into interest-bearing securities of varying degrees of risk and yield and sold to investors based on their portfolio objectives. These securities, also known as tranches, can trade actively in the secondary market.