Investment funds aimed at individual investors are barreling into collateralized loan obligations (CLOs), a complex and volatile type of security that was shaken by the financial crisis, the Wall Street Journal reported today. Lured by annual returns of as high as 20 percent, some mutual-fund managers are buying CLOs through investment funds that purchase stakes in loans to companies with low credit ratings. Another type of loan investment fund, business-development companies, also have begun buying CLOs, according to securities filings. The biggest buyers of these securities usually are hedge funds, insurers and banks. But mutual funds and business-development companies, which pitch themselves to individual, or retail, investors, have collected more than $60 billion in money from clients this year, according to Keefe, Bruyette & Woods, Inc. and fund-data provider Lipper.
