FAIR OAKS AAA CLO FUND: ETF GBP HDG ACC

Issuer: Alpha Ucits

Asset Class: Fixed Income

TER: 35bps

Trading Currency: GBP

Pays Income: False

Listing Date: 10 Feb 2025

Ticker: XAAA

ISIN: LU2825557270

This actively managed fund offers focused exposure to the highest-rated tranches of Collateralised Loan Obligations (CLOs). It exclusively invests in securities rated AAA, which represent the most senior and secure portion of the CLO capital structure. CLOs are structured finance vehicles that hold a diversified portfolio of senior secured corporate loans, primarily issued to below-investment-grade companies. By targeting only the AAA-rated debt, the strategy prioritizes capital preservation, benefiting from substantial credit enhancement that provides a robust buffer against potential losses from the underlying loan portfolio. The fund provides a unique opportunity to access a specialized segment of the credit market that has historically demonstrated resilience across various market cycles.

The investment proposition is compelling for those seeking attractive income streams combined with a strong defensive profile. A key feature of CLO debt is its floating-rate nature, meaning the coupon payments adjust in line with prevailing short-term interest rates. This characteristic serves as a natural hedge against inflation and rising rate environments, a significant advantage compared to traditional fixed-rate bonds. Furthermore, the active management approach allows the specialist portfolio managers to conduct rigorous due diligence on CLO structures and managers, aiming to identify the most attractive opportunities while carefully managing risks. The strategy aims to generate a consistent and high level of income relative to other similarly-rated fixed-income instruments.

This product is tailored for investors looking to diversify their fixed-income allocation and enhance portfolio yield without taking on significant credit risk. It is suitable for those who understand the complexities of structured credit and are seeking a stable, income-generating investment with low interest rate sensitivity. Given its focus on the highest-quality segment of the CLO market, it can act as a core holding or a satellite position for investors with a medium to long-term horizon. The accumulating share class structure is designed to reinvest any income automatically, facilitating the potential for compound growth over time.