The current market landscape is changing from persistent inflation with “higher-for-longer” interest rates to easing monetary policy. The installment of a new U.S Federal Reserve chairman could potentially change that narrative, which only adds to the uncertainty in the markets. That said, the Reckoner BBB-B CLO ETF (RCLO) is emerging as a strategic tool for income-focused investors, making it an ideal yield play in 2026.
RCLO is an actively managed fund operating in the collateralized loan obligation (CLO) space. It specifically targets debt tranches rated BBB+ down to B-. That said, the prime focus of RCLO is to maximize current income and shift its fund focus away from safer AAA tranches.
RCLO’s 30-day SEC yield is 7.06% and a distribution yield of 6.99% (both as of January 30), making it an attractive option for yield seekers. The new Fed chair could align with an aggressive rate-cutting regime. Thus, the higher yield potential is a boon for fixed income investors looking to complement their existing bond portfolio.
RCLO’s focus on BBB+ to BB- rated CLOs allows it to serve as an income alternative to higher-yielding corporate bonds with similar credit ratings. Again, the fund can complement an existing fixed income portfolio that primarily tilts toward bonds, but adds additional income diversification.
Built-in Risk Management
Because RCLO is actively managed and invests in CLOs, it has a build-in risk management component. CLOs are tied to floating-rate coupons, which translates to near-zero interest rate duration. In the event that the Fed raises interest rates to combat inflation, RCLO’s payouts adjust upward. This provides fixed income investors with protection from the price drops typically seen in traditional bonds with fixed rates.
Because the CLO market comes with its own unique set of risks and complexities, active management is almost imperative. With that, RCLO’s portfolio managers have the autonomy to adjust holdings to fit the current market conditions. This makes the fund an all-weather solution for income. Furthermore, RCLO taps into the experience of the fund’s managers. They have the requisite knowledge and experience necessary to navigate the CLO market.
Given the current macro factors and impending market uncertainty, RCLO is an ideal alternative for yield seekers looking for options wrapped within the cost efficiency, flexibility, and transparency of an ETF with a competitive expense ratio of 50 basis points.
For additional information on RCLO, click here.
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