Blackstone, State Street Set to Launch Active European CLO ETF

Blackstone Inc. and State Street Investment Management are joining forces to launch an exchange-traded fund tracking European collateralized loan obligations, a move that comes as private markets seek to widen their investor base.

The State Street Blackstone Euro AAA CLO UCITS ETF will seek to provide investors with exposure to floating rate triple-A rated euro-denominated CLOs, according to an emailed statement from the two firms. Europe’s CLO market is currently valued at about €250 billion ($291 billion).

Blackstone, which is the largest manager of CLOs and leveraged loans globally, will actively manage the securities, while State Street will oversee distribution to investors. The product is expected to be listed on the Deutsche Boerse Xetra, Borsa Italiana SpA and the London Stock Exchange.

Ann Prendergast, head of EMEA at State Street Investment Management, said the ETF aims to provide European investors diversified exposure to the CLO market, which has “exhibited historically high yields and a low duration risk profile.”

Top-rated CLO paper is one of the only triple-A rated asset classes which is structured as floating rate, a characteristic that has helped fuel demand from big US banks like Wells Fargo & Co. as well as Japanese lenders. Investors are betting that the floating-rate debt will pay relatively high yields as rates stay elevated.

CLO ETFs are gaining traction as they allow public market investors to get a foothold in the world of leveraged finance. In the US, Janus Henderson Group Plc’s triple-A CLO ETF has amassed about $21.8 billion of assets under management. The firm also launched a European equivalent earlier this year. And in 2024, Fair Oaks Capital Ltd. rolled out its own vehicle tracking top-rated European CLOs.