VanEck CLO ETF

CLOI

Market cap $1.22B

VanEck CLO ETF remains a buy, offering strong income and defensive positioning amid evolving interest rate and credit market dynamics. CLOI's floating-rate structure, high yield (5.95%), and active management make it attractive as the Fed approaches rate cuts, despite a slight dip in momentum. Expense ratio reduction to 0.36% and continued strong inflows highlight CLOI's competitiveness and growing investor demand for income-focused ETFs.

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With persistent rate volatility and uncertain inflation dynamics, floating rate instruments like FRNs and CLOs offer a compelling way to earn income while staying insulated from rate risk. Even as rate hikes appear to be behind us, the “all-clear” signal for long-duration fixed income hasn't arrived.

VanEck CLO ETF is a buy for income-focused investors seeking capital preservation and high yield with relatively low risk. CLOI's floating rate structure and active management are well-positioned to benefit from positive CLO market trends and tightening spreads. The fund offers a competitive 5.64% yield, diversified holdings, and slightly better recent returns than peers, justifying its higher expense ratio.

NEW YORK , June 23, 2025 /PRNewswire/ -- VanEck today celebrates the three-year anniversary of the VanEck CLO ETF (CLOI), reinforcing its position as one of the top-performing and fastest-growing funds in the collateralized loan obligation (CLO) ETF space. Since its launch on June 23, 2022, CLOI has distinguished itself through consistent performance and disciplined risk management, culminating in more than $1 billion in assets under management—a reflection of growing investor trust in the strategy.

Rising tariff turmoil has sparked a run from credit-sensitive instruments, with escalating trade tensions threatening economic stability. Wednesday's GDP print stoked recessionary fears when it showed the U.S. economy contracted for the first time since early 2022.

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CLOI, a fixed income ETF, buys investment-grade CLO tranches but recently showed a -4% drawdown due to liquidity issues, not credit spread widening. Despite its 5.8% yield, CLOI's volatility and drawdown are disproportionate compared to similar funds, making it less appealing in the current uncertain macro environment. CLOI's drawdown was comparable to junk bonds, highlighting its vulnerability to liquidity shocks, which is concerning for a short-dated IG bond fund.

By William Sokol, Director of Product Management Investors new to CLOs often stick with AAAs, but we argue investors should consider looking at lower rated tranches. Investors new to collateralized loan obligations (CLOs) may choose to constrain themselves to AAAs, but we believe this is misguided.