Invesco has launched two actively managed Ucits ETFs, providing professional investors with access to the highest-rated segments of the collateralised loan obligation (CLO) market.
The launch includes the Invesco USD AAA CLO Ucits ETF, Europe’s first Ucits ETF offering diversified exposure to USD AAA CLO notes, and the Invesco EUR AAA CLO Ucits ETF.
CLOs are structured investment vehicles that issue securities backed by a diversified pool of senior secured corporate loans. Investors in different CLO tranches are compensated based on seniority, with AAA-rated tranches receiving priority distributions, providing them with significant protection. Historically, no AAA-rated CLO in either USD or EUR has ever defaulted, according to the asset manager.
The ETFs will comply with European Securitisation Regulation requirements, ensuring that originators or sponsors retain a minimum 5% net economic interest in the CLOs, and aligning managers’ incentives with investors. These new ETFs leverage Invesco’s expertise in private credit and ETF management, two of the firm’s largest and fastest-growing investment areas. They are designed to offer institutional investors consistent income and capital preservation by investing primarily in AAA-rated CLO tranches.
Stephanie Butcher, co-head of investment at Invesco, said: “Clients choose to partner with Invesco for the depth and breadth of our offering, from asset class and investment style to the choice of investment vehicle. We aim to deliver the best results for our clients by empowering highly experienced teams to focus on their key areas of expertise, and we can leverage this advantage by combining specialisms that further benefit clients. For instance, we have been combining our expertise in Private Credit and ETF construction successfully for 15 years in the US, and we expect the launch of this type of actively managed ETF to drive growth in Europe.”
Unveiling the intricacies of collateralised loan obligations
Michael Craig, head of European senior loans at Invesco Private Credit, emphasised the value of experience in navigating the $1.3 trillion CLO market: “How you gain exposure to this asset class is crucial, and having an experienced manager making the investment decisions can make all the difference. With over 25 years of experience as both an investor and issuer of CLOs, we know that the quality of the CLO manager is key to performance through market cycles. Our active security selection, risk management process, and market presence add significant value. While we aim to deliver index-like performance, we’re not constrained and actively select each security we invest in based on its merit. 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.”
The launch also highlighted the growing appeal of ETFs as a vehicle for gaining efficient exposure to new asset classes. Gary Buxton, head of ETFs and indexed strategies for Emea and Apac at Invesco, said: “Last year’s record flows bear testament to the popularity of the ETF structure. The ETF assets we manage in Europe grew by 40% in 2024, and we believe demand should continue broadening as more ETFs are created to provide investors with efficient exposure to new asset classes, including those that have been difficult to access. For instance, 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.”
Invesco were not the first AAA CLO ETF in Europe, Janus Henderson were…
https://www.janushenderson.com/en-gb/adviser/press-releases/janus-henderson-launches-its-first-aaa-clo-etf-in-europe/