Are you an investor seeking higher yields in today’s market environment with the Federal Reserve keeping rates higher for longer? If so, you may want to consider exchange-traded funds (ETFs) that focus on collateralized loan obligations (CLOs). This corner of the ETF space offers a unique opportunity for income-seeking investors looking to diversify their portfolios.
Collateralized loan obligations are securitized pools of floating-rate loans to businesses, which generate interest for investors. While the underlying loans can be made to non-investment grade borrowers, AAA-rated tranches are the least risky in the CLO world, providing a level of safety for investors. In fact, loans in CLOs have historically shown a higher average recovery rate compared to high yield bonds, making them an attractive option for those looking for higher yields.
One ETF to consider in this area is the Janus Henderson AAA CLO ETF (JAAA), which offers a 30-day SEC yield of 6.73% and a net expense ratio of 0.21%. With the majority of its holdings in AAA-rated securities, this fund provides a level of stability while still offering a competitive yield. Additionally, the VanEck CLO ETF (CLOI) and BlackRock’s AAA CLO ETF (CLOA) are other options worth exploring in this space.
It’s important for investors to be aware of the risks associated with CLO ETFs, including volatility during economic downturns and the credit quality of the underlying assets. By staying informed and being fee-conscious, investors can make informed decisions about incorporating CLO ETFs into their investment portfolio.
At Extreme Investor Network, we believe that exploring unique investment opportunities like CLO ETFs can help investors diversify their portfolios and potentially achieve higher returns. Stay updated on the latest trends and insights in the investing world by joining our network today.
