The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  VanEck CLO ETF to a Morningstar Medalist Rating of Neutral.  The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy’s management team earns a Below Average People Pillar rating. The fund's assessment results in an Average Process Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's style-agnostic evaluation of this fund's process seeks to understand whether the strategy has a performance objective and sensible, repeatable execution. VanEck CLO ETF earns an Average Process Pillar rating.    The most important driver of the rating is the firm's five-year retention rate of 83% over the period. A reasonable level of diversification across individual securities also bolsters the rating. The fund's top 10 holdings account for 33% of assets. Lastly, the process is limited by its parent firm's inferior risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.6 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 The investment strategy as stated in the fund's prospectus is as follows: 


The investment seeks capital preservation and current income.  The fund is an actively managed exchange-traded fund (“ETF”) that normally invests at least 80% of its total assets in investment grade-rated debt tranches of collateralized loan obligations (“CLOs”) of any maturity. The Advisor intends to invest primarily in CLO securities that are U.S. dollar denominated. However and the fund may from time to time invest up to 30% of its net assets in CLO securities that are denominated in foreign currencies. It is non-diversified.

 This strategy's 12-month yield is 5.7%, higher than its average peer's 4.7%. In addition, it has a 6.6% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk.

Average

Process

VanEck CLO ETF earns a Below Average People Pillar rating. Francis G. Rodilosso, the longest-tenured manager on the strategy, boasts 20 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.5 stars, demonstrating encouraging risk-adjusted performance. Despite having a small team, the two listed managers boast 14 years of listed portfolio management experience.  Portfolio managers have made only a small personal investment in the fund, with the maximum investment by either manager being less than $10,000. That isn't sufficient to align their interests with those of the strategy's investors.

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Below Average

People

VanEck’s ownership structure and specialization make it unique among industry peers. The firm’s founding family and namesake still have control, and its product lineup still reflects its legacy as a specialist in niche market segments. VanEck earns an Average Parent Pillar rating. 

Founded by John van Eck in 1955, the firm staked its claim in the industry by capitalizing on burgeoning markets. Starting with the opening of Western Europe to U.S.-based investors in the wake of the Marshall Plan, VanEck’s largest and most successful products provide exposure to areas of the market that are off the beaten path, such as hard assets, emerging-markets debt, and below-investment-grade-rated corporate debt.

Through its history, VanEck has taken an opportunistic approach to product development. For instance, since 2018, VanEck has launched strategies that provide exposures ranging from international REITs to companies involved in video game development. Regardless of where their reach takes them, however, VanEck builds a case that the strategy will be relevant over the long term and that its risks must be easy to understand. However, not all its products catch on, and the firm has shuttered several offerings in the last decade. 

VanEck remains a privately held firm, wholly owned by CEO Jan van Eck and his family. Although this enables the firm to focus on the long term and the firm offers some employees participation in profits, the firm hasn’t used equity as a recruiting and retention tool and introduces some key-person risk in the executive suite.

Parent

Vaneck CLO ETF

CLOI is actively managed to invest in collateralized loan obligations (CLOs) of any maturity. While targeting USD-denominated high-quality CLOs, the fund may still hold high-yield bonds in foreign currency.

By William Sokol, Director of Product Management Despite their lack of inclusion in broad “agg” indices, CLOs have proven they belong in investors' core bond portfolios. Bond investors typically look to their core bond portfolios to provide a ballast against market volatility.

CLOs Now a Core Necessity

In the world of collateralized loan obligations (CLOs), market participants tend to favor the highest-rated issues, often sticking to CLOs with AAA grades. That's prudent.

CLO Credit Risk Could Be Worth the Gambit

By William Sokol Director of Product Management We discuss three reasons why CLOs have had the most attractive risk-adjusted returns in fixed income over the past decade and look at why active management is essential in mitigating risks.

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By Patrick Schramm, ETF Strategist Since the beginning of 2023, equity markets have ripped despite the presence of what appeared to be multiple headwinds—the question now is, what could go wrong? In my numerous conversations with clients to start off 2024, one common theme sticks out—people want to talk about the resilient U.S.

The Resilient Bull: Dissecting the Market's Strengths and Vulnerabilities

CLOs rallied strongly in December, ending 2023 with a 10.54% return. The current backdrop suggests CLOs are well positioned to start 2024.

Will CLOs Continue to Rally in 2024?

By William Sokol, Director of Product Management With CLOI's two-year anniversary approaching next year, we take a closer look at why this ETF is drawing so much interest.

Get to Know CLOs With William Sokol

VanEck CLO ETF offers investors access to high-quality Collateralized Loan Obligations (CLOs) for capital preservation and current income. CLOI is actively managed by PineBridge Investments and aims to provide an enhanced yield while avoiding downgrades and default losses. The fund is diversified with 69 holdings and primarily invests in investment-grade CLO tranches, offering issuer diversification and low interest rate sensitivity.

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Yields have reset higher across fixed income markets, leaving bonds well positioned in a range of different economic and interest rate scenarios in 2024. Introduction to Income Investing Income investing is a strategy that aims to generate a steady stream of income from investments, typically through interest payments or dividends.

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Collateralized loan obligations, or CLOs, may be a way for advisors to enhance retail clients' portfolios. They provide investors with access to a diverse pool of senior secured loans.

How CLOs Can Enhance Returns for Retail Clients

As of November 22, the S&P 500 and Bloomberg U.S. Aggregate Bond Index are higher by 20.3% and 1.2%, respectively, year to date. So by most accounts, being long traditional assets has been effective in 2023.

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Fixed income ETF demand has been strong in 2023 led by Treasury ETFs. However, advisors have been rewarded by turning to alternatives in the fixed income space, such as those focused on the collateralized loan obligations (CLOs) market.

How CLOs Can Provide an Alternative to Traditional Bond ETFs

CLOs outperformed investment-grade and high yield bonds in September as fixed-rate debt continues to face headwinds in rising Treasury yields. The VanEck CLO ETF (the “Fund”) remains conservatively positioned relative to its benchmark, the J.P. Morgan CLO Index, as we expect downgrades to increase into 2024 as the impact of higher interest rates materializes. The Fund had approximately 90% exposure to AAA rated CLOs in September, versus under 70% in the benchmark.

CLOs Gain Amid Surge in Yields

A recent surge in bankruptcies and defaults by high-yield issuers is unnerving some fixed income investors. Bond investors, particularly those seeking elevated levels of income, are rightfully jittery.

CLOs Look Sturdy Even as Junk Defaults Rise

The VanEck CLO ETF focuses on investing in high-quality collateralized loan obligations and has performed well in the past year. The CLOI ETF might benefit from the "higher for longer" interest rate environment. Credit spreads might settle lower as the longer end of the U.S. yield curve is starting to tick up.

CLOI ETF: Take Advantage Of Resilient Short-Term Rates

VanEck CLO ETF has improved its disclosures, now showing 95% of assets invested in investment grade securities for the ETF. CLOI has returned 8.1% on a 1-year basis, outperforming the Janus Henderson AAA CLO ETF with substantially the same exposures. The CLOI ETF appears to be a solid fund that generates modest returns from a portfolio of highly rated CLO securities.

CLOI: Revising Thesis On Updated Disclosures (Rating Upgrade)

Collateralized loan obligations (CLOs), single securities supported by larger pools of debt, are one of the corners of the fixed income that aren't as vulnerable to rising interest. This is expecially compared to, say, long-dated Treasurys and corporate bonds.

There's More to CLOs Than Rising Rates Protection

CLOs generated strong returns in June, with a hawkish Fed driving coupons higher and a rally in spreads. CLOI continues to outperform its benchmark in 2023.

CLOs Continue to Climb As Spreads Tighten and Coupons Rise

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ETFs continue to open up avenues of opportunity for individual investors by capturing institutional investor strategies in an easily, widely accessible wrapper. One such strategy, that of collateralized loan obligations (CLOs), offers investors attractive income and yield with lower default risk.

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Collateralized loan obligations (CLOs) have typically been difficult for retail investors to access. However, CLOs offer potentially significant income and can outperform other fixed income categories on a relative basis.

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Bonds are bouncing back, but yields remain high, presenting income-oriented investors with a tempting scenario. However, with the possibility that interest rates will creep higher and elevate default risk in the high yield space, advisors and investors may want to go beyond basic fixed income strategies.

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VanEck's CLO ETF Named Newcomer Fixed Income ETF of the Year by With Intelligence

The VanEck CLO ETF (CLOI) has provided a steady dividend yield and low volatility in 2023, with a 30-day SEC yield of 6.4% and a 2% standard deviation. CLOI is expected to continue extracting high, safe yields from senior CLO tranches, with a projected total return of 7.5% for 2023. The CLO and leveraged loan market has seen rising default rates, but AAA CLO spreads are expected to stay rangebound in the near term, with increased demand from banks and overseas investors.

CLOI:  An Incredible Sturdy Way To Navigate 2023, 6.4% Yield

By William Sokol, Director of Product Management What Is a Collateralized Loan Obligation (CLO)? A collateralized loan obligation (CLO) is a portfolio of predominantly senior secured loans that is securitized and actively managed.

News for Vaneck CLO ETF ETF (CLOI)