The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  BlackRock AAA CLO ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's inexperienced portfolio management team drives the strategy's Below Average People Pillar. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in corporate bonds and A rated bonds compared with category peers. The strategy's parent organization earns the firm an Above Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

Morningstar's evaluation of this fund's process aims to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. BlackRock AAA CLO ETF earns an Average Process Pillar rating.    The leading factor in the rating is the parent firm's five-year risk-adjusted success ratio of 59%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent firm's superior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 3.2 stars, also influences the rating. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

 Compared with other funds in the Ultrashort Bond Morningstar Category, this fund takes on significantly lower credit risk. But in terms of long-term interest-rate sensitivity, it hews closely to its average peer over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been substantially underweight corporate debt in recent years. In the latest month, the strategy has also relatively underweighted corporate debt compared with Morningstar Category peers. Additionally, there's been a notable underallocation from A rated bonds over the past few years. Similarly, in recent months, the strategy also had less exposure to A rated bonds than peers. Finally, during the past few years, the fund leaned meaningfully towards debt with 10- to 15-year maturities. In this month, the strategy also leaned more towards debt with 10- to 15-year maturities compared with its peers.

 This strategy's 12-month yield is 6.3%, higher than its average peer's 4.7%. While a higher yield may deliver more income, it also tends to indicate higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio holds assets with a higher average surveyed credit quality of AAA, compared with the category average of A, and it holds no non-investment-grade assets, despite the average peers' 1%. Strategies with less credit risk may help to provide a reliable ballast during periods of market stress.

Average

Process

BlackRock AAA CLO ETF earns a Below Average People Pillar rating. The team is strengthened by its parent firm's five-year success ratio of 60%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median return for the period. However, the rating is weakened by the experience of the management team, which averages two years at this fund. The turnover of its management team also holds the rating back. The fund last saw a manager change three months ago.


Management on the team is unseasoned; the longest-tenured manager on the team, Nidhi Patel, has only about one year of listed portfolio management experience. They are currently not managing any other investment vehicles, with their focus devoted to this strategy. The team is small and inadequately equipped, with only one other listed manager supporting it. Together, the two average two years of listed portfolio management experience. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

Below Average

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Above Average

Parent

Blackrock AAA CLO ETF

CLOA is an actively managed fund that invests in USD-denominated CLOs that are rated AAA.

CLOA focuses on AAA-rated CLO tranches, which have extremely low credit and rate risk. It sports an above-average 6.3% yield and has outperformed since inception. It is also very similar to other AAA-rated CLO ETFs in the market, including JAAA.

CLOA: AAA-Rated CLO ETF, Good 6.1% Yield, Strong Performance

Launched in 2023, the BlackRock AAA CLO ETF has seen slow investor adoption compared to its competitor JAAA. Both offer similar 1-year total returns (~9.8%) and low volatility due to their AAA CLO holdings. The fund has an attractive 6.54% yield with low credit risk and volatility. CLOA has lower fees (20 bps) when compared to JAAA (22 bps).

CLOA: The Forgotten AAA CLO Fund From BlackRock

CLOA is a new fund from BlackRock. The vehicle focuses on AAA CLO paper.

CLOA: 6% Yield From This AAA Fund

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News for Blackrock AAA CLO ETF ETF (CLOA)