Fidelity Investments announced the launch of two actively managed exchange-traded funds that provide investors with access to the collateralized loan obligation market: the Fidelity AAA CLO ETF (FAAA) and the Fidelity CLO ETF (FCLO). The funds are listed on the Nasdaq Stock Market and are available commission-free for individual investors and financial advisors through Fidelity’s online brokerage platforms.
Fidelity said both ETFs seek to generate income through investments in CLOs, with FAAA generally investing at least 80% of its assets in CLOs rated AAA and FCLO investing the majority of its assets in CLOs rated from BBB+ to B- or the equivalent. The firm framed the products as providing “straightforward access” to a complex market, while pairing that exposure with Fidelity’s active management and credit research capabilities.
The company said the new ETFs expand its broader exchange-traded platform, which now includes 77 ETFs and ETPs with $154 billion in assets under management. Fidelity also pointed to its scale across fixed income, citing a $2.3 trillion fixed-income business and decades of experience in the high-yield and CLO markets, including activity as both an issuer and an investor. Fidelity said the portfolio management team for FAAA includes co-managers Dave DeBiase, Rob Galusza, and John Mistovich, while FCLO is led by portfolio manager Michelle Liu with DeBiase serving as co-manager.
Fidelity said it will waive management fees for both funds for the first 12 months. After the waiver period, the company said the gross expense ratio will be 0.20% for FAAA and 0.45% for FCLO. The firm also reiterated a range of standard risk disclosures related to CLO and fixed-income investing, including liquidity, interest-rate, credit, default, and volatility risks, and noted that ETFs may trade at a premium or discount to net asset value.
KEY QUOTES
“Investors are looking for new return and diversification opportunities, and we’re committed to meeting client needs by developing high-quality solutions like the new CLO ETFs. Fidelity has deep credit research capabilities and a longstanding history in the CLO space as both an issuer and investor.”
Harley Lank, Head of High Income & Alternatives, Fidelity Investments
“FAAA and FCLO enhance our ETF lineup, delivering straightforward access to an often complex market — reinforced by Fidelity’s proven investment capabilities and active management experience.”
Robin Foley, Head of Fixed Income, Fidelity Investments
