collateralized loan obligations (CLOs)

Collateralized Loan Obligations (CLOs) are investment vehicles that pool together a large number of high-yield loans made to companies. These loans are bundled and then divided into different slices or tranches, each with varying levels of risk and return. Investors buy these tranches based on their risk appetite, with higher-risk tranches offering higher returns and lower-risk tranches offering more stability. CLOs help lenders free up capital to issue more loans, while investors gain access to diversified exposure to corporate debt. They are complex financial products, but essentially, CLOs are a way to package and sell corporate loans to investors.