Money managers are hoping pension funds and insurance companies will become big buyers of leveraged loans, picking up the slack from CLOs.

It’s a new asset class for many institutional investors. To the extent that pension funds have invested in bank loans in the past, it’s often been through CLOs. Insurance companies are more familiar with leveraged loans, but they tend to have exposure through CLOs, too. That’s partly because, before the financial crisis, loan spreads were low and CLOs allowed them to leverage their returns.

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