ETFdb Logo
ETFdb Logo
  • ETF Database
  • Channels
    • Active ETF
    • Alternatives
    • Beyond Basic Beta
    • China Insights
    • Climate Insights
    • Commodities
    • Core Strategies
    • Crypto
    • Disruptive Technology
    • Dividend
    • Dual Impact
    • Emerging Markets
    • Energy Infrastructure
    • ESG
    • ETF Building Blocks
    • ETF Education
    • ETF Strategist
    • Fixed Income
    • Free Cash Flow
    • Future ETFs
    • Global Diversification
    • Gold/Silver/Critical Minerals
    • Innovative ETFs
    • Institutional Income Strategies
    • Leveraged & Inverse
    • Managed Futures
    • Market Insights
    • Megatrends
    • Modern Alpha
    • Multi-Asset
    • Night Effect
    • Portfolio Strategies
    • Retirement Income
    • Richard Bernstein Advisors
    • Tax Efficient Income
    • Thematic Investing
    • Volatility Resource
  • Tools
    • ETF Screener
    • ETF Country Exposure Tool
    • ETF Sector Tracker Tool
    • ETF Database Categories
    • Head-To-Head ETF Comparison Tool
    • ETF Stock Exposure Tool
    • ETF Issuer Fund Flows
    • Indexes
    • Mutual Fund To ETF Converter
    • ETF Data for Journalists
    • ETF Nerds
  • Research
    • First Bitcoin ETF
    • ETF Education
    • Equity Investing
    • Dividend ETFs
    • Leveraged ETFs
    • Inverse ETFs
    • Index Education
    • Index Insights
    • Top ETF Sectors
    • Top ETF Issuers
    • Top ETF Industries
  • Webcasts
  • Themes
    • AI ETFs
    • Blockchain ETFs
    • See all Thematic Investing ETF themes
    • ESG Investing
    • Marijuana ETFs
  • Multimedia
    • ETF 360 Video Series
    • ETF Trends on Videos
    • ETF Trends on Podcasts
    • ETF Prime Podcast
  • Company
    • About Us
    • Swag Store
  • PRO
    • Pro Content
    • Pro Tools
    • Advanced
    • FAQ
    • Pricing
    • Free Sign Up
    • Login
  1. Beyond Basic Beta Channel
  2. Make the CLO Call for Additional Income
Beyond Basic Beta Channel
Share

Make the CLO Call for Additional Income

Tom LydonSep 09, 2022
2022-09-09

Persistent inflation is highlighting investors’ income needs, but surging interest rates are making life difficult for fixed income investors.

Those scenarios underscore the need for market participants to consider unique income-generating strategies while maintaining favorable risk profiles. Among exchange traded funds that check those boxes, the VanEck CLO ETF (CLOI ) is an idea to consider.

The actively managed CLOI debuted in June, making it the newest addition to VanEck’s extensive lineup of income-oriented ETFs. That could also make CLOI one of 2022’s most relevant rookie ETFs.

“Collateralized loan obligations (CLOs), which are securitized pools of leveraged loans, may provide several attractive benefits within an income-oriented portfolio, including enhanced yields, structural risk protections, and diversification,” notes William Sokol, VanEck senior product manager. “We believe CLOs are particularly attractive in today’s rising rate environment. They pay floating rate coupons that adjust upwards as rates increase and, unlike fixed coupon bonds, won’t suffer price declines as a result of higher rates.”

The floating rate component of CLOI holdings is clearly relevant today, but it could have staying power. While it’s obvious the Federal Reserve is heading toward more rate hikes this year, the notion that rate increases will halt in 2023 is slowly dwindling. In fact, some market observers believe the Fed’s late efforts to dampen inflation imply the central bank will need to continue boosting borrowing costs in 2024, potentially adding to the allure of CLOI in the process.

Another significant advantage of CLOs, and in turn CLOI, is that the asset class can deliver solid returns without forcing investors to take on added credit risk.

“For example, AA-rated CLOs have provided significantly higher returns than ‘core’ U.S. bonds without significantly higher risk,” adds Sokol. “They’ve also provided similar returns as leveraged loans with lower risk. This is notable because of both the floating rate nature of these asset classes and the stark difference in credit quality (leveraged loans are typically rated BB and below, and an investor in a loan fund has direct exposure to these borrowers).”

Home to 18 holdings, CLOI sports a 30-day SEC yield of 4.26%, which is attractive under any circumstances, but even more so when considering over 85% of the ETF’s holdings carry investment-grade ratings, according to issuer data.

For more news, information, and strategy, visit the Beyond Basic Beta Channel.

Loading Articles...
Help & Info
  • Contact Us
Tools
  • ETF Screener
  • ETF Analyzer
  • Mutual Fund to ETF Converter
  • Head-To-Head ETF Comparison
  • ETF Country Exposure Tool
  • ETF Stock Exposure Tool
  • ETF Performance Visualizer
  • ETF Database Model Portfolios
  • ETF Database Realtime Ratings
  • ETF Database Pro
More Tools
  • ETF Launch Center
  • Financial Advisor & RIA Center
  • ETF Database RSS Feed
Explore ETFs
  • ETF News
  • ETF Picks of the Month
  • ETF Category Reports
  • Premium Articles
  • Alphabetical Listing of ETFs
  • Best ETFs
  • Browse ETFs by ETF Database Category
  • Browse ETFs by Index
  • Browse ETFs by Issuer
  • Compare ETFs
Legal
  • Terms of Use and Privacy Policy
  • © 2023 VettaFi LLC. All rights reserved.
Follow ETF Database
Follow ETF Database

Advertisement

Is Your Portfolio Positioned With Enough Global Exposure?

ETF Education Channel

How to Allocate Commodities in Portfolios

Tom LydonApr 26, 2022
2022-04-26

A long-running debate in asset allocation circles is how much of a portfolio an investor should...

Core Strategies Channel

Why ETFs Experience Limit Up/Down Protections

Karrie GordonMay 13, 2022
2022-05-13

In a digital age where information moves in milliseconds and millions of participants can transact...

}
X