In an effort to broaden investor access to specialized fixed-income strategies, Fidelity Investments has introduced actively managed exchange-traded funds (ETFs) centered on collateralized loan obligations (CLOs). The Fidelity AAA CLO ETF (ticker: FAAA) and the Fidelity CLO ETF (ticker: FCLO) are designed to deliver steady income streams while tapping into the demand for diversified yield sources in today’s market environment.
These additions underscore Fidelity‘s commitment to expanding its ETF portfolio, which now encompasses 77 ETFs and exchange-traded products managing approximately $154 billion in assets as of the end of 2025.
CLOs, which are securities backed by pools of corporate loans, have gained popularity among investors seeking higher returns compared to traditional bonds, especially in a landscape marked by fluctuating interest rates and economic uncertainty.
The FAAA fund prioritizes stability by allocating at least 80% of its holdings to CLOs rated AAA, the highest credit quality tier.
This approach aims to provide a conservative entry point into the CLO space, appealing to those focused on capital preservation alongside income generation.
In contrast, the FCLO fund targets a broader spectrum, investing mainly in CLOs with ratings from BBB+ down to B-, offering potentially higher yields but with increased credit risk exposure.
Both funds are actively managed by seasoned teams drawing on Fidelity’s extensive expertise in structured credit.
For FAAA, the portfolio is overseen by co-managers Dave DeBiase, Rob Galusza, and John Mistovich, who collectively bring more than 65 years of industry experience.
FCLO is led by Michelle Liu, a veteran with two decades in structured credit analysis, supported by DeBiase as co-manager.
This depth of knowledge is rooted in Fidelity’s over 20-year track record in CLO investments and its massive $2.3 trillion fixed-income operation, which includes credit research and risk management capabilities.
To make these ETFs more accessible, Fidelity is waiving management fees for the first 12 months following their launch.
Once the waiver period ends, FAAA will carry a net expense ratio of 0.20%, while FCLO’s will be 0.45%.
The funds are listed on the Nasdaq exchange and can be traded commission-free through Fidelity’s brokerage platforms, including online accounts and mobile apps.
This structure lowers barriers for retail and institutional investors, allowing them to incorporate CLO exposure without the complexities often associated with direct market participation.
Industry experts at Fidelity highlight the strategic value of these launches.
Harley Lank, Head of High Income and Alternatives, noted that amid evolving market conditions, investors are increasingly exploring innovative ways to enhance returns and mitigate risks.
He emphasized Fidelity’s strong foundation in credit analysis as a key enabler for navigating the CLO sector effectively.
Robin Foley, Head of Fixed Income, described the new ETFs as a natural extension of the firm’s lineup, simplifying entry into a sophisticated asset class backed by proven strategies.
This expansion comes at a time when active ETFs are surging in popularity, offering the transparency and liquidity of traditional ETFs combined with professional oversight to adapt to market shifts.
For investors, FAAA and FCLO represent opportunities to diversify beyond standard bond funds, potentially boosting portfolio resilience in volatile times.
As Fidelity continues to innovate in the ETF space, these CLO-focused vehicles could attract significant inflows, further solidifying the firm’s position as a leader in fixed-income solutions. With economic indicators pointing to sustained interest in yield-generating assets, these funds are poised to play a pivotal role in investment strategies.
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