VanEck’s New Fixed Income ETF Focuses on CLOs

CLOB seeks to provide both capital preservation and current income for its investors. The actively managed fund has a net expense ratio of 0.45%. 

“The launch of CLO-focused ETFs has been an important development in the CLO market, which is now approaching $1.5 trillion globally, and also for ETF investors that were not able to access this market before,” added William Sokol, senior ETF product manager at VanEck.

The primary focus of CLOB’s portfolio lies in collateralized loan obligations (CLOs). A dominant majority of CLOs within the fund’s portfolio are rated between AA+ and BB-. 

According to the fund prospectus, CLOB will not invest in CLO equity securities. However, a smaller portion of net assets may be allocated toward CLOs rated below BB-. Additionally, the fund may also invest a small portion of assets toward CLOs rated above AA+.

Primarily, CLOB intends to invest in CLOs that are U.S. dollar denominated. That said, the fund may invest a portion of CLOB’s assets in CLOs denominated in foreign currencies. 

To choose CLOs to add to the portfolio, CLOB uses a bottom-up analysis. This asset scrutinization process focuses on a number of factors, including underlying collateral, performance, structural terms, and an assessment of the CLO manager. 

To mitigate risk from the CLO portfolio, CLOB may also invest in derivatives. The fund expects the use of derivatives to focus on futures contracts or currency forward contracts. 

“Demand for CLOs in an ETF wrapper has accelerated in 2024 as advisors and investors seek to access loans in a liquid format,” noted Todd Rosenbluth, head of research at VettaFi. “VanEck has a strong heritage offering innovative fixed income ETFs so it is great to see them expand.”

With CLOB now available on the market, VanEck has 70 ETFs available in U.S. markets. These funds represent over $87 billion in assets under management. 

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