Alternative Access set to launch first-lien CLO bond ETF on Cboe BZX

Aug 14th, 2020 | By | Category: Alternatives / Multi-Asset

New York-based alternative credit manager Alternative Access Funds is gearing up for the launch of the AAF First Priority CLO Bond ETF (AAA US) on Cboe BZX Exchange.

Alternative Access set to launch first-lien CLO bond ETF on Cboe BZX

New York-based Alternative Access was founded by Wall Street veteran Peter Coppa to provide access to financial products previously only accessible to wealthy and institutional investors.

The fund, which is set to list in September, is expected to be one of the first to provide investors with pure-play exposure to collateralized loan obligations (CLOs) via an ETF wrapper.

CLOs are debt securities issued in different tranches by a trust or other special purpose vehicle and backed by an underlying portfolio consisting typically of below-investment-grade corporate loans.

The fund will be the debut ETF of Alternative Access Funds which was founded in 2018 by Wall Street veteran Peter Coppa, an alumnus of Marathon Asset Management, with the aim of providing broader access to financial products typically only accessible to wealthy and institutional investors.

The fund’s investment objective will be to seek capital preservation and income by delivering returns consistent with the general broadly syndicated floating rate AAA-rated CLO bond universe.

The fund will be actively managed and will invest at least 80% of its assets in AAA-rated first-priority, senior-most debt tranches of US dollar-dominated CLOs.

The fund may invest in CLOs of any maturity, though they must be rated AAA at the time of purchase. The underlying collateral pool for each CLO must also be comprised primarily of broadly syndicated senior-secured first-lien loans. No investments will be made in middle-market CLOs, CBOs, ABS CDOs and synthetic CLOs.

The fund will only invest in CLOs with a minimum initial total deal size of $300m and a minimum initial AAA tranche size of $150m. And to ensure diversification, the fund will not commit more than 2.5% of its assets to any single security and or more than 7.5% to any single CLO manager.

Peter Coppa, Founder, Alternative Access Funds, said, “Alternative Access strives to level the playing field in all areas of the investment universe, particularly with credit products, giving both institutional and retail investors greater access, liquidity and transparency. With the recent adoption of other credit-focused ETFs, we felt that the natural evolution was for a first-priority CLO bond instrument, especially as investors are thirsting for yield, with strong capital preservation characteristics.”

The fund will be co-managed by Alternative Access partners Todd Themistocles and Steve Kim.

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