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Invesco, the fifth-largest U.S. ETF issuer, has launched a pair of collateralized loan obligation (CLO) ETFs in Europe, including the continent’s first U.S. dollar-denominated AAA CLO ETF.
The Invesco USD AAA CLO UCITS ETF (ICLO) and the Invesco EUR AAA CLO UCITS ETF (CLOD) are listed on the London Stock Exchange (LSE), Deutsche Borse, Euronext Milan and the SIX Swiss Exchange both with total expense ratios (TER) of 0.35%.
ICLO and CLOD are the first Ireland-domiciled ETFs to offer 100% CLO exposure.
Moreover, the ICLO is the first European ETF to provide exposure to USD-denominated AAA CLOs.
Invesco’s Ireland-domiciled CLO ETFs were made possible after Ireland converged its stance with Luxembourg’s financial regulator, allowing managers to enter the ETF market by launching listed share classes of existing Irish-domiciled funds.
Fair Oaks Capital was first to market by registering its AAA CLO ETFs with the Commission de Surveillance du Secteur Financier’s (CSSF).
Gary Buxton, head of ETFs and indexed strategies for EMEA and APAC at Invesco, said: “Although the CLO market has grown rapidly, with outstanding issuance nearly doubling in the past five years, they have only recently become available to investors via an ETF, first in the US and now in Europe. This exposure opens up CLO investment to a wide range of sophisticated investors.”
Michael Craig, head of European senior loans at Invesco Private Credit, added: “We focus on CLOs from high-quality managers that we trust, as these tend to exhibit less volatility and better liquidity in stressed market conditions. We regularly perform stress-testing on our portfolios to simulate these scenarios.”
Atlanta-based Invesco manages $571.7 billion in 228 ETFs, including the $333.1 billion Invesco QQQ Trust (QQQ). That fund is the fifth-biggest in the U.S. and has gained 21% over the past year, roughly in line with the SPDR S&P 500 ETF Trust (SPY).
Elsewhere, credit-focused asset manager Palmer Square Capital Management will enter European ETFs with three strategies capturing collateralised loan obligations (CLOs).
This article was originally published in etf.com sister publication ETF Stream.