BlackRock ETF Trust II iShares AAA CLO Active ETF

CLOA

Market cap $1.26B

On October 6, 2025, INSPIRION Wealth Advisors, LLC reported selling out of BlackRock ETF Trust II - iShares AAA CLO Active ETF (CLOA 0.08%), an estimated $22.62 million transaction.

On Thursday, Adams Wealth Management disclosed that it reduced its position in the iShares AAA CLO Active ETF by nearly 65,000 shares—cutting about 20% of its holdings in the fund.

CLOA is a solid AAA CLO ETF, but JAAA offers a better risk-adjusted return and higher liquidity. A 50/50 mix of JAAA and CLOI matches CLOA's risk with superior returns and improved trading volume. The CLO market outlook is positive, but CLOA's advantages are not unique among peers, making alternatives more compelling.

The 10-Year Treasury yield signals that the market does not expect a recession in the near term. Current yield levels suggest inflation expectations remain elevated compared to recent years. Investors should interpret the bond market as pricing in persistent inflation rather than imminent economic contraction.

The iShares AAA CLO Active ETF is downgraded from 'Buy' to 'Hold' due to less favorable interest rate conditions and market risk exposure. CLOA holds a high-quality portfolio of mostly AAA CLOs, offering low interest rate duration and a 5.6% SEC yield. Despite a low probability of default, AAA CLOs are not risk-free and can experience drawdowns during market stress, as seen recently.

AAA CLOs, like the iShares AAA CLO Active ETF, offer compelling income-based attributes and limited price sensitivity in today's uncertain economic climate. CLOA ETF invests primarily in AAA-rated CLO tranches, providing liquid access to an illiquid asset with a weighted average coupon of 5.82%. Despite potential risks, CLOA ETF has shown consistent returns and benefits from a higher-for-longer interest rate outlook and rising demand for CLO vehicles.

Investors have upped their interest in actively managed bond ETFs, pouring record capital into them in January as some paid up in hopes of stronger returns.

CLO ETFs offer retail investors access to high-yield, floating-rate investments with historically low default rates, outperforming similarly rated corporate bonds. Investors should choose CLO ETFs based on their risk tolerance; AAA-rated options like CLOA and JAAA for conservative profiles and JBBB for investors with higher risk tolerances. Despite strong historical performance, caution is advised due to potential economic downturns and credit spread risks; I recommend AAA-rated CLOs for stability.

Several firms are planning to launch collateralized loan obligation (CLO) ETFs, enhancing options for investors. CLOs have provided attractive risk-adjusted returns over the past decade, especially when compared to other fixed income investments.

The BlackRock AAA CLO ETF invests in AAA-rated CLO securities, providing safety and attractive yields. The CLOA is almost identical to JAAA in terms of performance. However, its smaller size means the fund is less liquid. With the economy slowing, I believe investors should high-grade their portfolios with the CLOA or JAAA ETFs.