Content and data provided by various third parties and Fidelity − Terms of Use | Help/Glossary
Research > ETFs > ETF / ETP Commentary > 

Unlock CLO Arbitrage With Reckoner Capital’s Active Strategy

BY | ETF Database
6:22 am ET 09/15/26 | 9 VIEWS
Fixed-income investors in the current market environment frequently struggle to balance yield generation and credit safety. In a recent webinar with TMX VettaFi, John Kim, CEO of Reckoner Capital, explained why collateralized loan obligations (CLOs) offer an institutional rating arbitrage that remains largely unmatched in structured credit. See More: CLOs Emerge as a High-Conviction Option Amid Steady InflowsDisassociating 2008: CLOs vs. CDOsAdvisors can face resistance from clients who remember the 2008 financial crisis and reflexively associate CLOs with toxic subprime vehicles. However, the two couldn’t be more different. Kim directly addressed this misconception, noting that the two frameworks feature entirely different underlying collateral. “CLOs are based on senior secured corporate loans situated at the top of the stack,” he explained. Unlike static mortgage pools, CLOs are actively managed and highly diversified. They typically cap single loan exposure between 20 to 50 basis points across a portfolio of up to hundreds of corporate issuers. This structural seniority insulated CLOs during the global financial crisis. It yielded a zero-default rate at the AAA tier over its 30-year history.¹The Mezzanine DislocationThis underlying security also creates a statistical anomaly in the mezzanine layers. As mentioned in the webinar, a BBB-rated corporate bond carries an expected 10-year default rate around 7%. However, after the crisis in 2008, S&P revealed zero defaults at the BBB level for CLOs.² “You’re getting paid a BBB rate to hold a BBB-rated bond, but you’re getting a BBB-rated bond that acts like a AAA-rated bond,” Kim noted. “This incredible rating arbitrage simply does not exist in the vast majority of private assets.”Surgical ETF InnovationTo capture these opportunities, Reckoner Capital brings sophisticated institutional tools to individual investor accounts via capital-efficient ETFs. This includes the Reckoner Yield Enhanced AAA CLO ETF (RAAA ) and the Reckoner BBB-B CLO ETF (RCLO). These active funds give Reckoner Capital the flexibility to adjust holdings as needed to fit current market conditions while pursuing its investment strategy. In a macroeconomic environment marked by ongoing uncertainty, Reckoner Capital’s actively managed CLO ETFs seek to bridge the stability of cash and the income demanded in a high-inflation environment. For more news, information, and analysis, visit the Market Insights Content Hub. 1 Bank of America Global Research, “CLO Factbook,” 7/24/2026 2 S&P Global, “CLO Spotlight: U.S. CLO Tranche Defaults And Recoveries As Of April 7, 2026” and S&P Global, "Default, Transition, and Recovery: 2025 Annual Global Corporate Default And Rating Transition Study Credit ratings are assigned by Nationally Recognized Statistical Rating Organizations (NRSROs) on a typical credit rating scale that ranges from AAA (highest rating) to D (lowest). “Triple B” (BBB) and “Double B” (BB) refer to investment-grade and below-investment-grade ratings, respectively, reflecting the relative creditworthiness or risk of a security or issuer. For more information on credit ratings, please click here.Important Information Investors should consider the investment objectives, risks, charges and expenses carefully before investing. A prospectus and a summary prospectus which contains this and other information about the fund may be obtained by visiting https://funds.reckoner.com/assets/pdfs/RAAA-RCLO-Prospectus.pdf or call 212.597.2500. Please read each prospectus carefully before investing. Investing involves risk. Loss of principal is possible. Each fund’s principal investment risks include all or some of the following risks: 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 each 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.

More Commentary

Fixed Income ETFs Surge to All-Time Highs Ahead of Pivotal Fed Decision
BY | ETF Database
4:37 am ET 09/15/26 | 55 VIEWS
Fed Meeting: How Active ETFs Can Meet the Moment
BY | ETF Database
9:51 am ET 09/15/26 | 2 VIEWS
BNDI Worth a Bet as Bond Yields Rise
BY | ETF Database
6:02 am ET 09/15/26 | 14 VIEWS
View more Commentary

Search Commentary

Enter Keyword(s)
Filter Results

Performance data shown is past performance and is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. Yield and return will vary, therefore you have a gain or loss when you sell your shares. For standard quarterly performance, go to the fund's Snapshot page by clicking on the ETF/ETP's symbol.

ETFs may trade at a premium or discount to their NAV and are subject to the market fluctuations of their underlying investments.

For iShares ETFs, Fidelity receives compensation from the ETF sponsor and/or its affiliates in connection with an exclusive long-term marketing program that includes promotion of iShares ETFs and inclusion of iShares funds in certain FBS platforms and investment programs. Please note, this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral. Additional information about the sources, amounts, and terms of compensation can be found in the ETF's prospectus and related documents. Fidelity may add or waive commissions on ETFs without prior notice. BlackRock and iShares are registered trademarks of BlackRock, Inc. and its affiliates.

FBS receives compensation from the fund's advisor or its affiliates in connection with a marketing program that includes the promotion of this security and other ETFs to customers ("Marketing Program"). The Marketing Program creates incentives for FBS to encourage the purchase of certain ETFs. Additional information about the sources, amounts, and terms of compensation is in the ETF's prospectus and related documents. Please note that this security will not be marginable for 30 days from the settlement date, at which time it will automatically become eligible for margin collateral.

News, commentary (including "Related Symbols") and events are from third-party sources unaffiliated with Fidelity. Fidelity does not endorse or adopt their content. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use.

Any data, charts and other information provided on this page are intended to help self-directed investors evaluate exchange traded products (ETPs), including, but limited to exchange traded funds (ETFs) and exchange traded notes (ETNs). Criteria and inputs entered, including the choice to make ETP comparisons, are at the sole discretion of the user and are solely for the convenience of the user. Analyst opinions, ratings and reports are provided by third-parties unaffiliated with Fidelity. All information supplied or obtained from this page is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell a particular security, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating ETPs. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.

Before investing in any exchange traded product, you should consider its investment objective, risks, charges and expenses. Contact Fidelity for a prospectus, offering circular or, if available, a summary prospectus containing this information. Read it carefully.