Panagram Structured Asset Management, a subsidiary of Eldridge, has introduced its first ETF, an actively managed fund targeting lower-rated collateralized loan obligations (CLOs).
John Kim, CEO of Panagram.
The Panagram BBB-B CLO ETF (CLOZ US) has been listed on NYSE Arca with an expense ratio of 0.50%.
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.
Investor interest in CLOs has risen steadily in recent years due to inherent benefits such as low volatility, diversification of underlying securities, and low correlations with traditional fixed income assets.
Additionally, the loans underlying CLOs are also almost exclusively floating-rate in nature which has proven popular with investors amid rapidly increasing interest rates.
Despite growing to $1 trillion in size, the CLO market is relatively complicated, strengthening the argument for an active approach to the sector. Panagram, which is a $13.5 billion credit asset manager, has extensive experience in originating, structuring, monitoring, and investing in the CLO market and currently oversees one of the largest portfolios in the space.
In managing the ETF, Panagram invests in US dollar-denominated CLOs with credit ratings between BBB+ and BB- that have a minimum initial total offering size of $250 million. Up to 70% of the portfolio may be allocated to CLOs rated below investment-grade, while the fund may also hold a maximum of 10% of its assets in CLOs with a credit rating above BBB+. The fund has no limitations in terms of maturity and duration.
Panagram applies a bottom-up approach that reviews the current market environment for potential investment opportunities, including newly issued and secondary market CLOs. The firm monitors the ETF’s portfolio on a daily basis to proactively position investments for changing market conditions.
John Kim, CEO of Panagram, said: “Our goal is to provide investors with a liquid alternative to traditional fixed income with attractive structural features and a competitive yield. We recognize how difficult 2022 was, and the historical outperformance of CLO tranches versus other corporates led us to create this innovative floating-rate product for the retail investor. We are excited to launch CLOZ, which seeks to democratize CLO exposure and provide investors with the added benefit of expert oversight.”