Retail Investors Can Now Access CLO Yield

At the heart of AAM, within the DNA of AAM, is really income investing. Whether it's dividends on equities or coupons in fixed income, we're really focused, and we actually have a resilient income ETF lineup, which CLOZ is part of our newest edition. This is an area, the CLO market, the collateralized loan obligation CLO market. We've been keeping an eye on this space for quite some time.

It's roughly a $1 to $1.5 trillion market, which otherwise, up until recently, I'd say within the last four or five years, really hasn't been accessible for retail investors. Over the last four or five years, we've seen nearly $40 billion of assets come into CLO ETFs. We're seeing an increased appetite for not only institutional investors but retail investors dabbling in CLO ETFs.

What we've done with CLOZ is we realize that the CLO market is quite complex. At the end of the day, investors are drawn to the CLO market mainly because of the yield pickup. It's not uncommon to get a 100-200 basis point pickup in the investment grade arena over similar corporate bonds because of the complexity of CLOs. That yield pickup has really been beneficial to investors.

We think it's going to be exceptionally beneficial as interest rates continue to come down. Investors are faced with very hard challenges in terms of, unfortunately, you can't sit on the sidelines and collect 4% in your money market funds anymore. If interest rates, we had a rate cut in October. If we have another in December, now is the time to get off your cash, as we say here at AAM, and explore areas of the market like the CLO market or low duration income strategies to help facilitate that need for income.