Fidelity Jumps into Growing CLO ETF Market

Anyone who wants their ETF with a side of extra initials is in luck: the letters “CLO” are appearing more and more often alongside fund names.

That is, collateralized loan obligation exchange traded funds. Recently, companies, including Fidelity, Principal, Janus Henderson and Reckoner Capital Management, have added or prepped new CLO ETFs to their product lines. The funds invest in bundled corporate loans of varying credit quality. They’re also something the industry does not want investors to conflate with collateralized debt obligations (CDOs), the instruments strongly associated with the 2008 financial crisis.  

“In the alphabet soup of acronyms, it’s easy to associate CLOs with products such as asset-backed securities (ABS), collateralized debt obligations (CDOs), and residential mortgage-backed securities (RMBS),” per a new informational page on Fidelity’s website. “But the true story is more nuanced. The greatest damage and losses flowed from securities backed by subprime mortgages — particularly mortgage-linked CDOs.”

New in Town

Fidelity is new to the CLO ETF game, last week having launched its CLO and AAA CLO funds. However, the company has been issuing and investing in the products for more than 20 years, Harley Lank, its head of high income and alternatives, said in a statement. “Fidelity’s extensive research platform, proprietary data and credit market expertise give us the ability to assess opportunities across every phase of the market cycle, and CLOs continue to show sustained growth as investors look for new sources of income and diversification.”

The market for such products is indeed growing, data from Morningstar Direct show:

• CLO ETFs represented a total of more than $40 billion in assets in the US as of the end of January, up from $27 billion a year earlier.
• Nearly $15 billion flowed into the funds in 2025, as well as more than $3 billion last month.
• Of the 27 ETFs currently trading, 10 have been launched since 2025. 

More Outfits in the CLO Set: Janus Henderson, which provides the largest CLO ETF in the US market, the $26 billion AAA CLO ETF, last year filed for another product, the AA-A CLO ETF. Principal Global Investors is prepping a similar product that could go live by April. 

Another firm, Reckoner Capital Management, last week launched four such funds, after it introduced its first two last year. The four new products stand out from the rest of the crowd because they limit distributions. Two reinvest dividends and the other two make distributions an annual (rather than monthly) occurrence. “Our newly launched reinvesting and annual distribution CLO ETFs give investors the flexibility to match their cash flow requirements to their investment horizons and to recognize distributions as taxable income when the shares are sold,” Reckoner CEO John Kim said in an announcement.