Sep 26, 2022
BlackRock Takes Aim at Growing CLO ETF Assets Amid Bond Upheaval
Bloomberg News
,
(Bloomberg) -- The world’s largest exchange-traded fund issuer is throwing its weight into a growing corner of the fixed-income industry.
The BlackRock AAA CLO ETF would invest at least 80% of its assets in top-rated US collateralized loan obligations, according to a Friday filing with the Securities and Exchange Commission. Fees and a ticker are not yet listed.
Interest in CLO-tracking ETFs has been building even as a historically aggressive Federal Reserve roils other corners of the debt market. While the first plans for such funds were greeted skeptically by industry veterans, the floating-rate nature of the leveraged loans backing CLOs have proved popular as inflation surges and interest rates soar. That BlackRock is throwing its hat into the ring suggests there’s investor appetite, according to Bloomberg Intelligence’s Eric Balchunas.
“BlackRock has been much more calculated with their new filings lately so if they are filing for a CLO ETF it must mean they are seeing some legit demand from their clients,” said Bloomberg Intelligence senior ETF analyst Balchunas.
The Janus Henderson AAA CLO exchange-traded fund (ticker JAAA), which has only dropped about 1% in 2022 on a total-return basis, has accumulated nearly $1.6 billion in assets since launching two years ago. Returns on other proxies of the bond market have fared far worse with the iShares iBoxx $ Investment Grade Corporate Bond ETF (LQD) falling 21% loss and the iShares 20+ Year Treasury Bond ETF (TLT) sinking 29%.
©2022 Bloomberg L.P.