> For the complete documentation index, see [llms.txt](https://docs.noon.capital/llms.txt). Markdown versions of documentation pages are available by appending `.md` to page URLs; this page is available as [Markdown](https://docs.noon.capital/3.-the-yield-engine/yield-strategies/clos.md).

# CLOs

Part of the yield engine. Approved by governance; discussion and analysis on Noon’s Governance Forum.

## <mark style="color:$primary;">What are CLOs</mark>

A Collateralised Loan Obligation (CLO) is a security backed by a pool of corporate loans, structured into tranches by seniority.&#x20;

In the world of coporate debt, the senior (AAA-rated) tranches are paid first and absorb losses last, which is what makes them suitable for a stability-focused reserve.&#x20;

<mark style="color:purple;">**Noon**</mark>'s CLO exposure targets these senior tranches.

<mark style="color:purple;">**Noon**</mark>'s analysis evaluated Janus Henderson's **JAAA**, an ETF holding AAA-rated CLO tranches.

Launched in **October 2020**, JAAA has grown to become the **largest CLO ETF by assets under management (AUM),** surpassing **$20 billion as of early 2025**.

## <mark style="color:purple;">**Noon**</mark> <mark style="color:$primary;">Deployment Analysis: Summary</mark>

<figure><img src="https://3816918787-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FL26rQzcNmiUZrCXkxkjS%2Fuploads%2F5cdE6ZYLeO1JhdPnRWQ0%2FNOON%20Deployment%20Analysis%20JAAA%20(Dinari).png?alt=media&amp;token=a9e1e3b2-8a6c-43cf-a4af-9c74ebc35ced" alt=""><figcaption></figcaption></figure>

## <mark style="color:$primary;">Return generation mechanism</mark>

AAA CLO tranches yield more than comparably rated bonds largely because of complexity and liquidity premia rather than additional credit risk, floating-rate coupons that track short-term rates, and the structural protection of sitting senior in the capital stack.

The strategy also plays a complementary role in the basket: funding-rate arbitrage earns most when markets are greedy, while structured credit earns steadily when markets are cautious. Holding both smooths the basket's return across regimes.

## <mark style="color:$primary;">Documents</mark>

* A full risk assessment can be found archived in <mark style="color:purple;">**Noon**</mark>'s [**Governance Forum**](https://forum.noon.capital/t/risk-assessment-jaaa-clo/25/10)
* Primer: [**CLO Primer**](https://596450103-files.gitbook.io/~/files/v0/b/gitbook-x-prod.appspot.com/o/spaces%2FvawK0RJiR8PpG791Q3EH%2Fuploads%2FpoPe0I8vtSTU0DzhZNpw%2FCLO%20Primer%20PDF.pdf?alt=media\&token=5a7348cc-03c4-40f5-97f7-43b52e57a54d)