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Why Active CLO ETFs Can Shine as PCE Data Cools

BY | ETF Database
11:51 am ET 09/30/26 | 10 VIEWS
Given that the Federal Reserve raised interest rates earlier in September, inflation data that was already crucial has taken on a new meaning. These reports could now serve as a barometer for what is to come from the central bank.Key Takeaways: The August PCE report has come in, showing headline and core inflation far below analyst expectations. This can bode well for CLO strategies, which have already benefited amid a higher rate regime, as cooling PCE data may be a good signal for credit quality. Those seeking to build access to CLOs may wish to do so through an actively managed framework, such as the Guggenheim Investment Grade CLO ETF (GCLO). The August personal consumption expenditures (PCE) price index was released on Wednesday, September 30. This new PCE report put headline inflation at 3.4% and core inflation at 3% on an annual basis. Crucially, these numbers are below what analysts were expecting. Given that the August PCE report came in below analyst consensus, this may have interesting implications for the Federal Reserve. As a reminder, the PCE report is widely known as the Fed’s tried-and-true inflation gauge. With inflation data cooling, the Fed might adjust its plans for shifting interest rates, especially if PCE data remains consistent in the months to come. These developments obviously will have tremendous implications for one’s fixed income portfolio. After all, many were expecting another rate hike to occur before the end of the year. This new PCE report could very well throw a wrench in those expectations. Fortunately, there are more than a few fixed income approaches that can perform well in these sorts of conditions. For example, take a look at collateralized loan obligations (CLOs). To start, CLOs offer floating-rate payouts. As such, when interest rates are high, these securities can subsequently offer high yields. See More: GCSH Passes $250 Million in AUM: Here’s How It Happened Though cooling PCE data doesn’t necessarily support a rate hike, it does work in favor of CLOs. This is because lower PCE is a positive signal for credit quality, which in turn means default rates among CLOs tend to decline.Navigate the CLO Opportunity Set With GCLOThese advantages can be further amplified when approached through an active framework. For instance, look at how the Guggenheim Investment Grade CLO ETF (GCLO) approaches the space. GCLO aims to provide current income and total return through an actively managed CLO approach. The fund’s portfolio team blends top-down and bottom-up investment philosophies to help navigate the CLO market. The end result is a portfolio that ideally exposes one to the undervalued CLOs that a passive indexed strategy may have overlooked. Of course, due to the fund’s active management, GCLO can also reposition its exposures to best capitalize on whatever fixed income environment it finds itself in. It’s moments like these that highlight why active CLO exposure could be the way forward. Many were expecting a straightforward interest rate hike at some point this year, and the new PCE report has caught some off guard. With actively managed CLOs in one’s portfolio, investors and advisors can be ready to navigate all scenarios. For more news, information, and analysis, visit the Fixed Income Content Hub.

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