Centrifuge explains CLO structure for onchain credit

If you’ve ever wondered what happens when Wall Street’s most complex credit products meet programmable money, Centrifuge just published the receipts.

Nick Cherney, Head of Innovation at Janus Henderson, released a series of educational videos explaining the mechanics of collateralized loan obligations, or CLOs, and how their structure is being replicated onchain through the Janus Henderson Anemoy AAA CLO Fund, known as JAAA. The fund has accumulated roughly $687 million in assets under management and is live across eight different blockchain networks, including Ethereum and Solana.

How a CLO actually works

CLOs are one of those financial instruments that sound intimidating but follow surprisingly logical plumbing. At their core, a CLO pools together a diversified portfolio of floating-rate corporate loans, typically between 140 and 180 individual loans, and bundles them into a single structure. Investors don’t buy the whole pool. Instead, they buy slices, called tranches, that carry different levels of risk and reward.

The magic is in the waterfall. Cash flows from the underlying loans, think interest payments and principal repayments, get distributed top-down through the tranches. Senior tranches, the ones rated AAA, get paid first. Only after they’re made whole does money flow down to the next tranche, and so on. The junior tranches at the bottom absorb losses first but earn higher yields as compensation.

AAA-rated CLO tranches have maintained their ratings for decades with no principal losses, according to Cherney’s explanation.

Bringing the waterfall onchain

The JAAA fund takes this well-tested architecture and moves it onto blockchain infrastructure. Centrifuge, the protocol powering the tokenization layer, automates much of the investment process that traditionally involves layers of intermediaries, manual reconciliation, and settlement delays measured in days.

On the blockchain version, subscriptions and redemptions happen daily in stablecoins. The fund offers an annual percentage yield of approximately 4.5%.

By making JAAA accessible on Ethereum, Solana, Base, and five other networks, Centrifuge is casting the widest possible net for institutional and retail capital.

Centrifuge’s broader platform has contributed to a total value locked exceeding $1.6 billion in tokenized assets. JAAA alone accounts for a substantial portion of that figure.

Why CLOs are the next chapter after Treasuries

The educational video series was explicitly positioned as part of a narrative arc. The argument goes like this: stablecoins were crypto’s first real bridge to traditional finance. Tokenized Treasuries were the second. Onchain CLOs represent the third, and considerably more sophisticated, evolution.

Floating-rate loans are particularly relevant in the current environment. Unlike fixed-rate bonds, the underlying loans in a CLO adjust their interest payments as benchmark rates move. This means investors get built-in rate sensitivity without needing to actively trade in and out of positions.

Because JAAA tokens exist natively on blockchains, they can theoretically be used as collateral in DeFi lending protocols, integrated into yield strategies, or bundled into portfolio products. Traditional CLO tranches sitting in a custodian’s vault can’t do any of that.

Risk hasn’t disappeared, of course. Smart contract vulnerabilities, oracle dependencies, and cross-chain bridge risks all add layers of technical exposure that traditional CLOs don’t carry. And while AAA CLO tranches have never suffered principal losses historically, past performance in traditional markets doesn’t automatically transfer to blockchain implementations where operational risk profiles differ.

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