A CLO is a kind of investment fund, but it is one that has to follow closely defined rules about the flow of money into and out of the vehicle.
CLOs do not (generally) measure the performance of their loan investments in terms of their market value but in terms of par value, the amount they will repay at maturity.
The cashflow waterfall, or priority of payments, determines which investors and other participants get paid in which order. There are waterfalls for interest payments and principal proceeds.
The waterfalls constitute one of two mechanisms by which CLOs protect debt investors.