FAIR OAKS AAA CLO FUND : ETF E(GBP) DIST

Issuer: Alpha Ucits

Asset Class: Fixed Income

TER: 50bps

Trading Currency: EUR

Pays Income: False

Listing Date: 26 Sep 2024

Ticker: FAAA

ISIN: LU2785470191

This actively managed fund seeks to deliver an attractive income stream with a strong focus on capital preservation by investing exclusively in the highest-rated tranches (AAA) of Collateralized Loan Obligations (CLOs). The underlying assets of these CLOs are typically senior secured corporate loans, which have floating interest rates. This structure provides a natural hedge against rising interest rates, as the income generated by the portfolio tends to increase in such environments. The strategy is overseen by a specialist investment manager with deep expertise in the CLO market, aiming to provide consistent, high-quality returns.

The investment process is centered around rigorous due diligence and careful portfolio construction. The managers focus on building a diversified portfolio of AAA-rated CLO securities, spread across various CLO managers, underlying industries, and individual corporate borrowers to mitigate concentration risk. Active management is crucial, allowing the team to analyze the intricacies of each CLO structure and the quality of its manager, thereby selecting securities believed to offer the best risk-adjusted returns. This disciplined approach aims to capture the yield premium that AAA CLOs often provide over similarly rated corporate bonds while minimizing credit risk by staying at the top of the capital structure.

For investors, this instrument can function as a valuable component within a diversified fixed-income allocation. It offers a solution for those seeking regular, monthly income and lower volatility relative to equity markets. Its floating-rate nature makes it particularly suitable for portfolios in a period of uncertain or rising interest rates. The fund provides efficient access to a specialized segment of the global credit markets, which can be difficult for individuals to access directly, offering potential diversification benefits and an enhanced yield profile without venturing into lower-quality credit.