One of the most interesting trends in ETF land over the last few years has been the rise of CLO ETFs—funds that invest (usually actively) in collateralized loan obligations.
Five years ago, this asset class was exclusively for the preserve of institutional and hedge fund managers, but there are now 10 ETFs in this space, with combined assets under management of over $17bn. There is more to come with the likes of Nuveen, BlackRock, BondBloxx and Virtus among asset managers who have a CLO ETF in the pipeline and flow data suggests that more money than ever is flooding into these slightly exotic vehicles even as interest rates decline.
First, though, a quick refresher on CLOs, which are one of those slightly controversial financial structures that got a bad press after the Great Financial Crisis.