The Case for Collateralized Loan Obligations (CLOs)
CLOs are not a new asset class, but their availability to a wider range of fixed income investors is. CLOs have been a part of the vast securitized products market, which includes mortgage-backed securities (MBS) – the second-largest bond market in the world – for about 30 years. Like all securitized products, a CLO manager pools together different loans to create a portfolio in an attempt to produce a more diverse and more secure offering. MBS do this for home mortgages; CLOs do this for commercial bank loans.