Rate-Agnostic Income: Why Fed Moves Matter Less for CLOs

A common notion in the fixed income market surrounds rate decisions by the U.S. Federal Reserve as the primary pivot point for portfolio shifts. However, in the collateralized loan obligation (CLO) space, the rate conversation presents a different dynamic. In that scenario, interest rate policy is less concerning.TMX VettaFi sat down with Tim Wickstrom, co-CIO of Reckoner Capital, at ETF Exchange 2026 to discuss how rates affect CLOs. Wickstrom noted that it’s best to avoid viewing CLOs through the lens of a “rate bet.”The Duration MirageThe installation of a new Federal Reserve chairman this summer is introducing uncertainty in the fixed income markets. In a higher-for-longer rate environment, markets are wondering whether the new Fed chair will yield to dovish pressures regarding interest rate policy. These prognostications, however, matter less in the CLO market. While traditional bonds carry interest rate sensitivity to Fed hikes and cuts, CLOs are floating-rate instruments. This structural feature means their coupons adjust in tandem with rates, thereby neutralizing duration risk. “In our minds, you’re not taking a rate bet with this product,” Wickstrom told TMX VettaFi. “You’re just taking some of your unknown duration risk off the table… and then you’re still getting paid through a credit spread to do that.” See More: Beyond AAA: RCLO Is a Strategic Yield Play in 2026 The primary driver for CLO performance is the credit spread versus rates, though they offer competitive yields versus bonds. That said, a common question is whether Fed rate cuts would hurt CLO yields potentials Wickstrom pointed out a natural offset within the structure: As rates fall, the underlying corporate borrowers see interest expenses drop, which could lead to improved credit health. “As rates come down, the underlying borrowers actually have a cheaper cost of interest expense,” Wickstrom notes. “In theory, the credit gets better… You get less yield, but your underlying borrowers should benefit credit wise.”Strategic Tools: RAAA and RCLOFor prospective investors looking for easy ingress into the CLO exposure, Reckoner Capital provides two specific avenues for navigating this rate-agnostic structured credit environment via their actively managed ETFs: Reckoner Yield Enhanced AAA CLO ETF (RAAA ): This fund targets the highest-quality tier for CLOs (AAA-rated tranches). In doing so, the fund bridges the gap between predictable cash equivalents and investment-grade corporate bonds while also offering higher yield potential thanks to its leveraged strategy. Reckoner CLO ETF (RCLO): This fund appeals to high-yield seekers while eliminating duration risks associated with credit-sensitive instruments like corporate bonds. Because of the floating-rate features of CLOs, investors can achieve greater yield potential without venturing further out on the yield curve. Avoiding the Fed interest rate policy narrative, advisors can use RAAA and RCLO to focus on what matters most in structured credit: active manager expertise, an area where Reckoner Capital thrives in today’s ETF marketplace. Reckoner’s portfolio managers have years of experience in CLOs, making them specialists in this complex and nuanced corner of the fixed income market. See More: Secure Yield in an Uncertain Market With The RAAA ETF For more news, information, and analysis, visit the Market Insights Content Hub.Important InformationCarefully consider the fund’s objectives, risks, charges, and expenses before investing. The prospectus at each of the links above provides the full details. Read it carefully before investing. Investing involves risk including the risk of principal loss. Each fund’s principal investment risks, depending on the fund, include management risk, novel structure risk, affiliated fund risk, collateralized loan obligation risk, non-diversified fund risk, new fund risk, leverage risk, and liquidity risk. For additional information about these and other fund risks, please refer to the “Principal Investment Risks” section of the prospectus. ETFs may trade at a premium or discount to NAV. Shares of any ETF are bought and sold at market prices (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Past performance is no guarantee of future results. Collateralized Loan Obligations (“CLOs”) are structured products that issue different tranches, with varying degrees of risk, which are backed by an underlying portfolio consisting primarily of below investment grade corporate loans. Investments in CLOs presents risks similar to those of other credit investments, including interest rate risk, credit risk, liquidity risk, prepayment risk, and the risk of defaults of the underlying assets. Distributor: Quasar Distributors, LLC.