Palmer Square Capital Management, a leading issuer of collateralized loan obligations (CLOs), has introduced its first two ETFs.
Palmer Square is a $32 billion credit-focused alternative asset manager known for being a leading issuer of CLOs.
Listed on NYSE Arca, the Palmer Square Credit Opportunities ETF (PSQO US) offers an actively managed, comprehensive multi-asset credit solution, while the Palmer Square CLO Senior Debt ETF (PSQA US) delivers passive exposure to higher-quality CLOs.
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 underlying loans, which are selected by a CLO’s manager, typically may include domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans.
Although the underlying loans are rated below investment grade, most CLO tranches are typically rated investment grade because they benefit from diversification, credit enhancements, and subordination of cash flows.
The ETFs
According to Palmer Square, PSQO aims to simplify portfolio construction and provide enhanced access to the best relative value opportunities across corporate and structured credit, including CLOs, investment grade and high yield corporate bonds, asset-backed securities, and bank loans.
The fund comes with an expense ratio of 0.50%.
PSQA, meanwhile, tracks the CLO Senior Debt Index which covers the senior tranches of the CLO market, specifically those with credit ratings of AAA or AA.
AAA- and AA-rated CLOs have priority over lower-rated tranches on the interest and principal from the underlying pools of senior secured loans. By investing in these tranches, investors can gain access to a diverse pool of bonds which, collectively, may offer higher yields than other AAA- and AA-rated investments.
Highly rated CLOs can help diversify a traditional fixed income portfolio while exhibiting low volatility and low downgrade risk.
The fund’s expense ratio is 0.20%.
Commenting on the new listings, Chris Long, Chairman and CEO of Palmer Square Capital Management, said: “Our deep experience in managing opportunistic multi-asset credit strategies and funds across the spectrum of corporate and structured credit as well as our market-leading expertise in structuring, managing, and issuing CLOs ensures our ETFs are designed with a keen understanding of the market’s complexities and opportunities. As the creator of the first public Senior and Debt CLO benchmarks in 2015 and our position as a top issuer in the global CLO market, we have laid the groundwork to continue providing investors with high-quality access to the landscape of credit assets through a multitude of products, which will now include ETFs.”
Angie Long, Chief Investment Officer at Palmer Square Capital Management, added: “Our experience and expertise have culminated in these innovative ETFs, giving investors an efficient way to access sophisticated credit strategies. Palmer Square’s investment philosophy has been consistent through multiple credit cycles and is underpinned by the firm’s core competencies of locating relative value and selecting credits through granular, bottom-up fundamental credit analysis.”