Join Glenn Schorr as he sits down with Lauren Basmadjian, Partner and Global Head of Liquid Credit at Carlyle, for a deep dive into the world of CLOs (Collateralized Loan Obligations).

This episode of Evercore’s Flow of Funds podcast demystifies the CLO market, covering how CLOs are structured, the mechanics of cash flow, the array of risk/return opportunities, and the evolving investor landscape.Lauren Basmadjian draws on her 25 years in the industry to explain how CLOs act as “mini banks,” why the market is so resilient, and which types of investors are drawn to each tranche.Whether you’re new to structured credit or a market veteran, this episode delivers insights into one of today’s most dynamic asset classes.

**Episode Timestamped Overview:**

00:00 Welcome and Introduction

00:16 Lauren Basmadjian Background & Carlyle's Liquid Credit Platform

03:01 CLO Structure Explained

05:18 CLO Tranches: Risk, Return, and Investor Profiles07:50 CLOs vs. Other Securitized Products

09:27 CLO Fees, Resets, and Manager Upside12:13 Scalability and Managing Large CLO Platforms

14:12 Banks’ Role & Loan Sourcing

15:34 Who Buys CLO Tranches?

18:22 Risk Retention & Equity Tranche Limiting Factors

20:35 Managing CLO Credit Risk & Recovering from Defaults

22:59 Performance, Active Management, and Avoiding Defaults

25:06 Structural Protections: OC Test

26:12 What Defines "Good" CLO Performance?

27:30 Biggest Risks for CLO Investors

28:26 Default & Recovery Rates in CLOs

29:15 Liability Management Exercises (LMEs) Explained

30:43 Risks to Managers—Fees and OC Breaches

32:24 Reinvestment Risk & Market Conditions

34:03 Major Manager Mistakes and Importance of Position Sizing

34:52 Pricing, Returns, and Volatility's Silver Lining

37:29 Measuring CLO Manager Performance

38:26 Market Growth, Resets, and Industry Dynamics

40:01 Direct Lending, Tailwinds, and Supply/Demand Trends

42:16 Credit Cycles and Current Portfolio Data

44:18 Default Rates: Now and Ahead

45:51 Where the Losses Typically Land in CLOs

47:32 What Differentiates Top CLO Managers

49:13 Carlyle’s Loan Sourcing & Bank Relationships

51:23 Marketing Performance and Opportunities for Growth52:33 Looking Forward: Trends and Fee-Paying Opportunities53:55 Speed Bumps & The State of the Software Sector

57:40 AI at Carlyle: Real World Applications

59:21 What Could Really Change the CLO Market

60:35 European Capital Rules & Insurance Investors

60:45 One Big Misunderstanding: CDOs vs. CLOs

61:02 Wrap Up and Closing Remarks

Applicable current disclosures regarding the companies discussed in this video are available at the offices of Evercore ISI: 55 East 52nd Street, New York, NY 10055, and at the following site: [evercoreisi.mediasterling.com/disclosure⁠](http://evercoreisi.mediasterling.com/disclosure%E2%81%A0)

07: CLO’s Explained: How they Work and What Drives Returns with Lauren Basmadjian

Evercore: Flow of Funds with Glenn Schorr

07: CLO’s Explained: How they Work and What Drives Returns with Lauren Basmadjian