A new approach to investing in AAA-rated CLOs

This article was produced by Invesco as part of their valued industry partnership with Insurance Investor.

Why CLO ETFs for insurance portfolios?

In today’s environment, insurance investors continue to seek high-quality yield sources that align with regulatory constraints and portfolio diversification goals. Collateralised Loan Obligations (CLOs) — particularly AAA-rated tranches — can offer attractive risk-adjusted returns and structural risk mitigations that can suit the needs of insurance balance sheets. The emergence of actively managed ETFs in this space has opened up access to this previously hard-to-reach asset class.

CLOs: among the largest unknown asset class?

The CLO market has quietly grown into a US$1.3 trillion¹ segment of fixed income, nearly doubling in size over the past five years. Despite its scale, CLOs remain one of the least understood asset classes in fixed income, largely due to their private credit nature and historical inaccessibility to most investors. Until recently, only the largest institutional investors could participate in this market, particularly in the highest-rated AAA tranches.

That changed with the launch of ETFs focused on AAA CLO notes. The first of such ETFs were introduced in the US about five years ago. Since then, these ETFs have gained traction globally, including in Europe, following regulatory developments. Today, actively managed AAA CLO ETFs see over US$27 billion in assets², reflecting growing demand from a broader investor base seeking yield, credit quality, and diversification.

For insurance portfolios, CLO ETFs may offer a compelling way to access high-grade credit exposure with liquidity and transparency—two features increasingly valued in today’s market.

Discover how actively managed ETFs are unlocking access to AAA-rated CLOs

Footnotes

¹ Source: BofA Global Research, Intex through 30 June 2025.

² Source: Invesco, Bloomberg, as of 30 June 2025.

Investment risks

The value of investments and any income will fluctuate (this may partly be the result of exchange rate fluctuations) and investors may not get back the full amount invested.

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Data as at 28 October 2025, unless otherwise stated. This is marketing material and not financial advice. It is not intended as a recommendation to buy or sell any particular asset class, security or strategy. Regulatory requirements that require impartiality of investment/investment strategy recommendations are therefore not applicable nor are any prohibitions to trade before publication.

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