New York, NY – As the economy faces uncertainties with rising unemployment and an impending economic slowdown, investors are seeking high-yielding investments to navigate through the challenging times. One notable option that has caught the attention of investors is the PIMCO Senior Loan Active Exchange-Traded Fund (LONZ).

LONZ ETF stands out as an actively managed fund specializing in the leveraged loan asset class. While the fund has shown promising performance compared to passive leveraged loan ETFs, the outperformance can be attributed to LONZ’s unique mix of lower credit quality investments and higher leverage.

In light of the economic concerns looming ahead, some investors are considering adjusting their portfolios to include higher-grade investments and steer away from the non-investment-grade leveraged loans held in LONZ. This shift towards investment-grade Collateralized Loan Obligation (CLO) ETFs could potentially offer similar yields with improved credit quality.

The PIMCO Senior Loan Active Exchange-Traded Fund, with its focus on bank loan assets, has gained attention from investors for its actively managed approach to the leveraged loan space. Bank loans, also known as leveraged loans, have historically been debt securities issued by less creditworthy companies, with many non-bank entities participating in recent years.

With a significant portion of its portfolio allocated to leveraged loans and US collateralized loan obligations (CLOs), the LONZ ETF boasts $541 million in assets and charges a competitive expense ratio of 0.60%, with fee waivers until October 2025.

Delving deeper into the fund’s portfolio holdings, investors can observe a 30-Day SEC yield of 6.5% and a distribution yield of 6.7%. The fund’s allocation across various securities includes bank loans, bonds, CLOs, and other short-duration instruments, highlighting its diverse investment strategy.

In terms of credit quality, the majority of LONZ’s portfolio comprises non-investment-grade securities, with varying allocations to BB, B, CCC-rated assets, and unrated securities. This mix of credit ratings reflects the fund’s risk profile and potential for returns.

Performance-wise, the LONZ ETF has demonstrated solid returns since its inception in June 2022, with average annual returns of 8.7% and impressive year-over-year performance figures. Comparisons with passive ETFs like the Invesco Senior Loan ETF (BKLN) shed light on LONZ’s outperformance and the factors contributing to its success in the market.

As investors evaluate their options in the current economic landscape, some are considering alternative floating-rate funds like Janus Henderson AAA CLO ETF (JAAA) or Janus Henderson B-BBB CLO ETF (JBBB) for their potential benefits. These CLO funds offer structural credit enhancements that could provide added security amidst uncertain market conditions.

Looking ahead, investors are advised to stay vigilant of economic indicators and consider adjusting their portfolios to mitigate risks associated with non-investment-grade securities. While the LONZ ETF has shown resilience, diversifying into higher-quality assets such as CLOs could offer a more secure investment strategy in the face of a changing economic environment.