"Active ETFs incorporating CLO-based fixed income strategies are gaining traction, reflecting strong demand for differentiated yield within a liquid, transparent ETF wrapper. This endorsement points individual investors toward a corner of credit markets most have never traded directly: collateralized loan obligations."
"A CLO is a securitized pool of senior, secured leveraged loans, typically 150 to 250 corporate borrowers, sliced into tranches by credit risk. The AAA tranche sits at the top of the waterfall, paid first and absorbing losses last."
"Janus Henderson runs the largest dedicated AAA fund, with the Janus Henderson AAA CLO ETF carrying $25.9B in net assets and tracking the J.P. Morgan CLO AAA Index with a 5.35% dividend yield. Total returns for JAAA, CLOI, and AAA have been competitive over the past year."
Active ETFs that incorporate collateralized loan obligations (CLOs) are becoming increasingly popular as investors seek differentiated yield. CLOs are securitized pools of leveraged loans divided into tranches by credit risk. The AAA tranche offers high-coupon income, especially in a rising interest rate environment. Major ETFs in this space include Janus Henderson AAA CLO ETF, VanEck CLO ETF, and Alternative Access First Priority CLO Bond ETF, all showing competitive returns. However, floating-rate income presents risks that may not be immediately apparent to investors.
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