Corporate credit manager Fair Oaks Capital has launched Europe’s first collateralised loan obligation (CLO) ETF.
The Fair Oaks AAA CLO UCITS ETF (FAAA) will list on Deutsche Boerse on 10 September and the firm said it plans to list FAAA on the London Stock Exchange (LSE) “shortly after”.
FAAA is an ETF share class version of an existing Luxembourg-domiciled Fair Oaks fund, the Fair Oaks AAA CLO fund, which currently houses €161m assets under management.
ETF Stream understands issuers a have faced challenges getting CLO ETFs approved by the Central Bank of Ireland (CBI).
The ETF captures euro-denominated AAA-rated CLOs and is classified as Article 8 under the EU Sustainable Finance Disclosure Regulation (SFDR).
CLOs issued in the US since January 2019 are also UCITS ineligible, effectively meaning US CLOs cannot be included within a UCITS ETF.
Collateralised loans are secured bank loans that offer potentially higher yields relative to similarly rated loans.
Fair Oaks Capital already manages two CLO UCITS funds on the Alpha UCITS platform.
Miguel Ramos Fuentenebro (pictured), co-founder and partner of Fair Oaks, said: "Fair Oaks AAA CLO ETF offers investors liquid exposure to a diverse pool of AAA-rated floating-rate assets, which have a superb track record of no defaults since the first AAA-rated CLO was issued over 25 years ago.
"Our core belief is that the CLO market generates consistent, repeatable, and superior risk-adjusted returns over multiple market cycles versus other credit strategies."
The launch is well aligned with fund selector's previous desires for further product development in the active fixed income space.
Janus Henderson has also been tipped to launch a UCITS re-run of its US strategy – the Janus Henderson AAA CLO ETF (JAAA) - in Europe should regulations around its UCITS eligibility change.
