Unfortunately, in an economic downturn leveraged loans and CLOs will have significant capital implications for banks and insurance companies which have to increase capital to sustain unexpected losses when assets become riskier or more illiquid. Increasing capital in an economic downturn is not easy, so companies typically have to sell assets, which can lead to fire sales. Importantly, before an economic downturn comes, civil servants, nurses, firemen, teachers and policemen whose pensions have exposures to leveraged loans and CLOs will also take a hit as well. All individuals who have investments in ETFs and fixed income bond funds would do well to see what their exposure to leveraged loans and CLOs are.