Those who are well-versed in the fixed income market are likely aware of how attractive the collateralized loan obligation (CLO) opportunity set is right now.
Key Takeaways:
- CLOs are currently offering strong potential for fixed income investors, due to their high yields and floating-rate coupons.
- However, CLO exposure may best be tackled through active management, in order to access the full opportunity set.
- Guggenheim offers exposure to an actively managed CLO ETF through the Guggenheim Investment Grade CLO ETF (GCLO)
First, CLOs simply offer strong yield potential that often outpaces corporate bonds with similar credit ratings. Given that the ‘income’ portion of fixed income is often a key priority for investors, attaining high yield on a consistent basis gives CLOs a compelling use case.
Furthermore, CLOs are also particularly well-positioned to navigate the current interest rate environment. Many advisors and investors are expecting the Federal Reserve to raise interest rates at least once in the coming months.
A higher-for-longer rate environment can distinctly work in favor of CLO strategies. This is because CLOs pay out floating-rate coupons, which are payments tied to short-term reference rates. Naturally, this puts CLOs in a good position to benefit from rate hikes, or simply an environment where interest rates stay elevated.
See More: How the Fixed Income Environment Favors Structured Credit
A Unique Moment for Active Managers
Despite the clear advantages within the CLO marketplace, investing in any old CLO strategy may not offer the strongest benefits. After all, many index-based CLO approaches tend to focus on the AAA-rated tranches. By doing so, these funds may be missing out on the significant yield opportunities within high-quality A- or BBB-rated CLO tranches.
This is why active management within the CLO space can be particularly advantageous. Active managers can navigate the CLO market and opportunistically find yield opportunities that indexed strategies may be missing out on.
This includes the Guggenheim Investment Grade CLO ETF (GCLO). GCLO is an actively managed fund from the Guggenheim team that takes on CLO exposure with a compelling blend of income and risk management.
See More: Got Interest Rate Worries? Consider Structured Credit
When choosing CLOs to invest in, GCLO’s active portfolio team blends top-down investing with bottom-up fundamentals. The fund leverages Guggenheim’s inherent expertise in the CLO market to find attractive securities to invest in across the CLO universe.
The end result is a fund that is offering strong yield at a time when many fixed income funds are faltering. As of September 30, 2026, GCLO has a 30-day SEC yield of 4.43%.
Originally posted on ETF Trends
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