economy
Investors poured $2.3 billion into this riskier corner of the bond market in July
Investors are drawn to collateralized loan obligations for their attractive yields.
TL;DR
- Investors put $2.3 billion into CLO ETFs last month and $11.8 billion for the year.
- CLOs offer attractive yields because their coupon payments adjust with short-term interest rate changes.
- The Federal Reserve is divided on monetary policy, with some officials favoring rate hikes.
- CLOs outperformed other fixed-income assets in the first half of the year.
- John Kerschner of Janus Henderson believes CLOs should always be part of a portfolio and are good diversifiers.
- Cathy Bevan of Benefit Street Partners notes that CLO yields are attractive compared to equivalent corporate credit risk.
- AAA-rated CLOs are the safest option for individual investors, although lower-rated CLOs offer higher yields.
- CLO ETFs can diversify a portfolio but should not be the majority of fixed-income holdings.