Who were CDO tranches sold to?
The purchasers of rated tranches typically were institutions–pension funds, universities, school districts, municipalities, insurance companies, hedge funds, and mutual funds. These institutions often were required by law to purchase primarily highly rated fixed income assets. The equity tranches were marketed to high net worth individuals. To make the bottom tranche attractive, it is typically promoted as a fixed income security that for small additional risk will produce much higher returns than ordinary bonds.
