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Stephen Gandel

CLOs Are the New Hedge Funds. Plan Accordingly.

The latest hot investment won’t be foolproof.

No guarantees these will keep on coming.

No guarantees these will keep on coming.

 Photographer: Andrew Harrer/Bloomberg 

A number of hedge fund firms have a hot product. It’s not their hedge funds.

Och-Ziff Capital Management’s investors withdrew $418 million from its hedge funds in the second quarter. Total inflow of assets under management, however, were $1.2 billion, its largest increase in assets in four years. The firm’s hot product: collateralized loan obligations — a derivative debt investment that invests in leveraged loans and is a cousin of the type of funds that blew up in the housing bubble.