BKLN - JBBB: A Good Fund To Pair Against Bonds

2024-02-23 18:34:16 ET

Summary

• Collateralized loan obligations, or CLOs, are complex financial instruments consisting of a pool of loans, offering a way to invest in corporate debt with a mechanism to mitigate interest rate risk.
• The Janus Henderson B-BBB CLO ETF provides access to floating-rate CLOs and is a unique investment opportunity for individuals and institutions.
• The JBBB fund offers diversification potential and floating rate exposure, but investors should be aware of the higher credit risk associated with B to BBB-rated CLOs.

Collateralized loan obligations don't get much love from the media, but are worth considering in a portfolio. What are they? Floating-rate Collateralized Loan Obligations (CLOs) are complex financial instruments that consist of a pool of loans. These loans are typically senior, secured, non-investment grade loans issued by corporations. The pooled loans are securitized and structured into tranches with varying degrees of risk and return. The "floating-rate" aspect refers to the interest rates on these loans, which are not fixed but rather adjust in accordance with market interest rates, usually pegged to a benchmark such as the London Interbank Offered Rate ((LIBOR)) or its successor rates. This characteristic helps protect investors from interest rate fluctuations....

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