A steepening yield curve and the uncertainty surrounding a new U.S. Federal Reserve chairman are only adding to an already complex financial landscape thus far in 2026. As such, investors are demanding higher yields beyond what traditional government bonds may offer. That said, one potential place to look is collateralized loan obligations (CLOs) via an exchange-traded fund (ETF). One fund investors may want to consider without taking on too much credit risk is the Reckoner Yield Enhanced AAA CLO ETF (RAAA ).
The AAA Advantage
By specializing in the highest-quality tier for CLOs (AAA-rated tranches), RAAA bridges the gap between safer cash equivalents and investment-grade corporate bonds, which offer higher yield potential. AAA tranches represent the most senior tranche issued by a securitized pool of senior secured loans. Investors are paid first in the event of a default, offering greater credit safety versus their corporate bond counterparts.
The flexibility of floating interest rates can be beneficial if the central bank suddenly pivots to tighter monetary policy. However, a new Fed chief coming in May could change that narrative. The flexibility of floating interest rates can be beneficial in the event the central bank suddenly pivots to tighter monetary policy. This also gives CLOs less rate sensitivity compared to traditional bonds.
Dampening Volatility
Because the fund is actively managed and floating rates give investors peace of mind in uncertain macro environments, such as the current one. RAAA’s portfolio managers have the autonomy to adjust the fund’s holdings as necessary to align with current market conditions. As such, changes to the fund’s holdings can be made to temper any market volatility that may arise. Furthermore, RAAA’s portfolio managers work to identify higher-yielding opportunities to maximize income. As of January 30, the fund’s 30-day SEC yield is 5.41%. It has a distribution rate of 5.23% (as of February 2).
Since the CLO market carries its own unique set of idiosyncratic risks and complexities, active management is a necessity in this corner of the fixed income market. RAAA’s portfolio managers bring a deep well of experience in CLOs as well as the requisite knowledge to navigate this specialized market.
All that said, RAAA can be a viable option wrapped within the cost efficiency, flexibility, and transparency of an ETF that fixed income investors can use to diversify their portfolios. In an uncertain market such as now, income diversification is imperative.
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Important Information
Carefully consider the fund’s objectives, risks, charges, and expenses before investing. The prospectus at www.reckoner.com/raaa or 212.597.2500 provides the full details. Read it carefully before investing.
Investing involves risk including the risk of principal loss. The fund’s principal investment risks include management risk, novel structure risk, affiliated fund risk, collateralized loan obligation risk, non-diversified fund risk, new fund risk, leverage risk, and liquidity risk. For additional information about these and other fund risks, please refer to the “Principal Investment Risks” section of the prospectus.
ETFs may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market prices (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
Past performance is no guarantee of future results.
Collateralized Loan Obligations (“CLOs”) are structured products that issue different tranches, with varying degrees of risk, which are backed by an underlying portfolio consisting primarily of below investment grade corporate loans. Investments in CLOs presents risks similar to those of other credit investments, including interest rate risk, credit risk, liquidity risk, prepayment risk, and the risk of defaults of the underlying assets.
Distributor: Quasar Distributors, LLC.
