Collateralized loan obligations (CLOs) were once the exclusive domain of institutional investors. However, as Reckoner Capital co-CIO Tim Wickstrom noted in an ETF Exchange 2026 session titled “How to Generate Alpha in Fixed Income,” the advent of ETFs democratized access for retail investors.
The ETF wrapper allows investors to gain access to this trillion-dollar market. As Wickstrom noted during the session, the CLO market “lends itself well to be an ETF wrapper.” It has seen “significant growth the last five to six years.”
Demand Drivers
Uncertainty isn’t just relegated to the equities market. The fixed income space is also facing its fair share of headwinds, giving investors ample reasons to diversify their portfolios. One area presenting opportunities is structured credit, specifically CLOs.
The primary driver behind the recent surge in CLO ETFs is greater yield optionality in an uncertain rate environment. Money market rates are beginning to lose their appeal. This has prompted investors to seek more “durable income” that can potentially outperform a traditional bond portfolio.
“I think people are looking for the income portion of their portfolio to do more,” Wickstrom explained.
Unlike traditional fixed-income assets, CLOs are floating-rate instruments. This means they carry minimal duration risk, making them a compelling option for most macro environments. The current environment is one example where interest rates may stay higher for longer. As Wickstrom noted, CLOs can potentially allow investors to “pick up a little bit more credit spread without going further down on the duration risk spectrum.”
Quality and Durability
The structured credit market, and in particular CLOs, carries its own unique complexities. Wickstrom explained that a typical CLO may hold a pool of 150-300 senior secured loans to large U.S. corporations. These loans sit at the top of the capital structure. The company’s assets back them and are senior to both equity and subordinated debt.
Further into the session, Wickstrom addressed common misconceptions in the CLO market by highlighting the resiliency of these structures after the 2008 Financial Crisis.
“CLOs are getting access to diversified senior secured loans, which sit at the top of the capital structures,” Wickstrom said, noting that in contrast to single-name corporate debt, a CLO effectively removes “single-name risk.” He added that “the standardization that we’ve seen in the structured credit market and the amount of history that investors can actually look at” now justifies a forthcoming wave of retail adoption.
During the session, a poll revealed that while 50% of the audience had no allocation to structured credit, 40% are already using it as a diversifier. Wickstrom views this as the beginning of a sustainable cycle, stating that “general adoption and institutional adoption lead to retail adoption.”
To meet growing demand for CLOs, Reckoner Capital has six funds targeting AAA and BBB-B CLOs. Depending on the fund, investors can choose monthly, minimal annual, or annual distributions. Given the nuanced nature of CLOs, these funds are actively managed by portfolio managers with deep expertise in this space.
By providing a “complexity premium” without the long-term duration traps inherent in the traditional bond market, CLO ETFs are gaining adoption. However, more investor awareness is a necessity as structured credit access to retail investors is still in its nascent stage, or as Wickstrom said, “the education phase.”
Look for Reckoner Capital to help lead that charge as more investors become aware of CLOs.
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For important information about the ETFs, please click here https://reckoner.com/raaa/ for RAAA, click here https://reckoner.com/raay/ for RAAY, click here https://reckoner.com/raar/for RAAR, click here https://reckoner.com/rclo/ for RCLO, click here https://reckoner.com/rcly/ for RCLY, click here https://reckoner.com/rclr/ for RCLR.
Important Information
Carefully consider the fund’s objectives, risks, charges, and expenses before investing. The prospectus at each of the links above provides the full details. Read it carefully before investing.
Investing involves risk including the risk of principal loss. Each of the fund’s above have various principal investment risks which may include management risk, novel structure risk, affiliated fund risk, collateralized loan obligation risk, non-diversified fund risk, new fund risk, leverage risk, and liquidity risk. For additional information about these and other fund risks, please refer to the “Principal Investment Risks” section of the prospectus.
ETFs may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market prices (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.
Past performance is no guarantee of future results. Diversification cannot assure a profit or protect against loss in a down market.
Collateralized Loan Obligations (“CLOs”) are structured products that issue different tranches, with varying degrees of risk, which are backed by an underlying portfolio consisting primarily of below investment grade corporate loans. Investments in CLOs presents risks similar to those of other credit investments, including interest rate risk, credit risk, liquidity risk, prepayment risk, and the risk of defaults of the underlying assets.
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