These lenders are actively managed securitization vehicles that mostly buy higher-risk assets like leveraged loans. CLOs, in turn, are funded by a slice of equity and layers of debt of varying seniority. After CLOs, mutual funds are the next-largest vehicle for holding leveraged loans, with about 20 percent of the market.
These funds allow investors to redeem their shares daily, although the underlying loans take longer to sell. As a result, investors may react to financial stress by trying to redeem their shares before the funds have sold their most liquid assets.