PGIM AAA CLO ETF

PAAA

Market cap $4.51B

PAAA offers an ideal, low-risk way to access AAA CLOs, combining consistent income, capital appreciation, and strong outperformance versus peers and benchmarks. The ETF boasts lower fees, higher returns, and greater liquidity than competitors, making it a robust core or income-generating portfolio holding. AAA CLOs historically have zero defaults, floating rates, and higher yields than Treasuries, but investors should be aware of price volatility and spread compression risks.

PGIM AAA CLO ETF offers a safer alternative to most AAA CLO funds for risk-on cash allocations. PAAA demonstrated superior performance and stability compared to sector leader JAAA during the recent market downturn and rebound. I recommend PAAA for investors seeking higher yields than savings accounts, CDs, or money markets, with moderate price fluctuation risk.

Matt Collins discusses why volatile markets are driving investors to search for safety and steady returns. He makes the case for AAA-rated CLOs, collateralized loan obligations, which have learned from past mistakes and now offer a more attractive risk-return profile than traditional fixed income investments.

PAAA offers stability and resilience amid market volatility, with a 5.5% dividend yield and minimal decline compared to broader indexes. The fund focuses on AAA-rated CLO debt, ensuring high priority for repayment and low risk of default. There have not been any defaults within AAA-rated CLO debt over the last. PAAA's monthly payouts provide consistent income, making it a defensive position to offset market uncertainty and volatility.

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PAAA is a newer ETF investing in AAA-rated CLOs. Default rates for these securities are zero. Dividends are good, with a 5.9% yield. Despite potential Fed cuts, PAAA's yield should remain competitive, trading at a 1.0% - 1.5% spread to t-bill rates.

Investors have been married to their money market funds for the better part of the last two years. But a recent poll from VettaFi's Q4 Fixed Income Symposium in October showed more market participants may finally be willing to break out of their comfort zones and redeploy those funds into riskier assets.

PGIM launched PAAA in 2023, targeting retail investors with access to the $1.2 trillion collateralized loan obligation (CLO) market, traditionally reserved for institutions. PAAA primarily invests in senior AAA-rated CLO tranches, aiming for total returns through current income and capital appreciation. The fund maintains a high level of diversification, with no single holding exceeding 2%, and invests in a range of issuances from reputable managers.