Investors Pull Cash From CLO ETFs in Biggest Outflow Since April

Core Insights - Exchange-traded funds (ETFs) holding corporate loans experienced their first outflows since April, indicating rising investor concerns over credit quality [1][2] - The outflow amounted to approximately $516 million, contrasting with a previous average inflow of about $421 million per week over the past year [2] - Recent failures of auto lender Tricolor Holdings and car-parts supplier First Brands Group have heightened caution among credit investors [3] Fund Performance - The Janus Henderson AAA CLO ETF, with $25 billion in assets, led the outflows with $476 million withdrawn, marking the highest redemptions since April's market volatility [4] - The fund recorded an additional $10 million in outflows on the following Monday [4] Market Trends - Concerns over credit quality and underwriting standards are rising across various credit markets, with bond spreads for business development companies (BDCs) widening significantly [5][6] - JPMorgan's BDC index widened by 60 basis points to 220 basis points, raising potential risks for CLOs if this trend continues [6] - Publicly traded BDC stocks have reached multi-year lows, reflecting increased credit stress fears [7] Credit Quality - Despite the rising angst in credit markets, AAA spreads for private credit CLOs and broadly syndicated CLOs remain tighter, even with exposure to leveraged borrowers [7]