CLOZ: A High-Yield, Low-Risk Option for Income Investors

CLOZ: A High-Yield, Low-Risk Option for Income Investors

Panagram’s CLOZ offers income and diversification for investor portfolios.

ETF.com
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Reviewed by: etf.com Staff
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Edited by: etf.com Staff


 

The Panagram BBB-B CLO ETF (CLOZ) offers investors a unique opportunity to access a niche area of the credit market: collateralized loan obligations (CLOs) rated between BBB+ and B-. 

CLOs are issued by trusts or special purpose entities that are collateralized by a pool of loans, which may include senior secured loans, senior unsecured loans, and subordinate corporate loans. The investments could be of any maturity, purchased from both the primary and secondary markets.

CLOZ: The High Yield, Low Risk Income ETF

John Kim, CEO and CIO at Panagram, explains why CLOZ should be on the radar for income-seeking investors.

  • High Yield Potential: Compared to other credit products, CLOZ boasts a very attractive yield. Kim highlights that despite the high yield on paper, CLOs have a "great track record" of returning principal to investors. This makes them a compelling option for those seeking income without sacrificing safety.
  • Diversification Benefits: An allocation to CLOZ can significantly enhance portfolio diversification. Unlike traditional corporate bonds, CLOs exhibit low correlation to both equities and investment-grade credit. This means they can act as a hedge against potential downturns in other asset classes.
  • Strategic Allocation: Kim suggests incorporating CLOZ into the "yield section" of a portfolio, alongside traditional Treasuries and corporate bonds. This allows investors to capture a higher yield without compromising safety. Additionally, CLOZ's floating rate structure protects against rising interest rates.
  • Distinct Features: Two key features differentiate CLOZ from other CLO ETFs. First, it offers exposure to the BB portion of the CLO capital structure, a segment known for its attractive yields and surprisingly strong credit performance. Second, the team behind CLOZ is comprised of CLO specialists with extensive industry experience. This deep understanding of the CLO market allows them to make informed investment decisions that benefit the fund's performance.

In conclusion, the CLOZ ETF provides a compelling option for investors seeking high yield, low-risk exposure to the CLO market. Its diversification benefits and unique features make it a valuable addition to a well-balanced portfolio.  CLOZ also was nominated for “Best New Active ETF” at the 2024 etf.com Awards for its performance and value for investors.  

 

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