CLOZ ETF

CLOs have several tranches. Equity tranches are the riskiest ones, but also have the highest yields, and strongest potential returns. Debt tranches are safer and lower-yielding, some significantly so, some moderately so.

Panagram BBB-B CLO ETF invests in below investment grade CLOs with a focus on BBB-B ratings for high-income and capital preservation. CLOZ is a unique product offering that has significant exposure to BB rated CLOs. BBB and BB rated CLOs are currently attractive relative to similar risk corporate securities.

Both JAAA and JBBB are actively managed ETFs that invest in senior loan CLO tranches. JBBB specifically targets BBB-rated tranches, while CLOZ has an equal mix of BBB and BB tranches. Despite their similarities in terms of strong yields, performance history, and low volatility, there are some key distinctions between the two funds.

This week on ETF Prime, Host Nate Geraci spoke with VettaFi Senior Research Analyst Zeno Mercer about the artificial intelligence sector and ETFs focused on AI. Later in the episode, Geraci interviewed John Kim, CEO & CIO of Panagram, about his company's CLOs ETFs.

CLO debt ETFs offer investors strong yields without significant credit or rate risk. CLOZ focuses on CLO tranches rated BBB-BB, yielding significantly more than most bond ETFs, somewhat higher than its CLO peers. The fund has performed exceedingly well since its inception, and I have high hopes for the future.

Panagram Bbb-B Clo ETF has had strong performance since its inception, but its future success depends on credit risk. The fund primarily invests in BBB and BB-rated Collateralized Loan Obligation tranches, offering current income and capital preservation. The CLOZ ETF stands out from similar funds due to its focus on lower-rated tranches, offering higher yields but also higher risk.

The CLOZ ETF has rallied significantly, delivering a full year's worth of returns in just 3 months as leveraged loans have performed well in 2023. At current portfolio yields ~10% and worst case default experience from GFC, CLOZ should still deliver 6-9% forward returns. However, tactically, I believe a pullback is imminent, as credit spreads have widened but leveraged loans and CLO ETFs have not yet responded.

Collateralized loan obligations, or CLOs, offer investors good growing dividends and low interest rate risk. Their performance since inception has been outstanding, if somewhat short. A quick look at 3 CLO ETFs follows.

CLOZ is the highest-yielding CLO ETF in the market, with a strong, fully-covered 10.7%. It has very low interest rate risk as well. An overview of the fund follows.