The Opportunity in CLO Investments

Larry SwedroeCollateralized loan obligations (CLOs) were abandoned after the global financial crisis (GFC) of 2007-2009. Since then, CLOs have made a comeback due to their strong performance during the GFC and beyond. CLO notes issued before the GFC did not have material defaults, and many CLO equity securities issued then ended up with annualized returns above 20%.

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By 2021, the CLO market had surpassed $1 trillion in assets under management and had replaced banks as the largest lender to private-equity-backed companies.