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Allocating to collateralised loan obligations, or CLOs, can improve strategic positioning by adding resilient assets with a history of outperformance and low correlations versus traditional fixed income. Their attractive yields, floating rate coupons and position at the top of the capital stack contribute to a compelling case amid uncertainty surrounding rates and economic growth. Moreover, with a default-free track record, CLOs from the AA and AAA tranches offer exceptional stability.
A clo fund committed to quality
The PGIM Global AAA CLO Fund is an actively-managed global fund that provides diversified exposure to U.S. and European investment-grade CLOs. Committed to the highest quality standards, the fund invests in AAA and AA-rated CLO tranches, which offer the most favourable liquidity and default profiles. Actively managed for enhanced yield, the fund targets stable income with low credit risk using a bottom-up, relative-value approach.
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INSTITUTIONAL-QUALITY ACCESS TO CLO OPPORTUNITIES
With $862 million in total assets under management, PGIM’s fixed income platform is one of the industry’s largest and most experienced active managers, offering institutional-grade access to CLO opportunities through its AAA CLO strategy, managed by a dedicated team of over 30 professionals.
Source: PGIM. AuM & staffing as of 31 March 2025. 1. Source: PGIM, CLO market data as of 31 January 2025 2.. Source: Creditflux, 30 June 2024. 3. Source: JPM CLOIE, as of 28 Feb 2025.
Bank Loans Risk: The Fund’s ability to receive payments of principal and interest and other amounts in connection with loans (whether through participations, assignments or otherwise) will depend primarily on the financial condition of the borrower. The failure by the Fund to receive scheduled interest or principal payments on a loan because of a default, bankruptcy or any other reason may adversely affect the income of the Fund and reduce the value of its assets.
Call Risk: If an issuer exercises its right to redeem a security prior to its maturity (a call), the Fund may not recoup the full amount of its initial investment and may be forced to re-invest in lower-yielding securities, securities with greater credit risks or with other less favourable features.
Credit Risk: The value of debt securities may be adversely impacted by the erosion in the ability of the issuer to pay the amounts of interest and principal owed as they become due.
Emerging Market Risk: The Fund invests in emerging markets, which may experience political, market, social, regulatory, and/or economic instabilities. These instabilities may reduce the value of the Fund’s investments.
Securitised Product Risk: Securitised products may be less liquid than other debt securities, may be prone to substantial price volatility and are subject to issuer repayment, counterparty and credit risk. Securitised products carry certain additional risks which may adversely impact the return on the securities, including: the possibility that distributions from collateral securities will not be adequate to make interest or other payments; the quality of the collateral may decline in value or default; and the possibility that the securitised products are subordinate to other classes.
Sovereign Debt Risk: Sovereign debt risk is the risk that the governmental entity that controls the repayment of sovereign debt may not be able or willing to repay the principal and/ or interest when due in accordance with the terms of such debt, due to factors related to its cash flow, its foreign reserves and political constraints, among others. If a governmental entity defaults, there may be few or no effective legal remedies for collecting on such debt.
Custodial Risk: Assets which are traded in markets where custodial and/or settlement systems are not fully developed may be exposed to risk in circumstances where the custodian will have no liability.
Junk Bonds: High-yield, high-risk bonds have predominantly speculative characteristics, including particularly high credit risk. The non-investment grade bond market can experience sudden and sharp price swings and become illiquid due to a variety of factors.
Political Risk: The value of the Fund's investments may be affected by uncertainties such as international policy developments, social instability and changes in government policies. This can result in more pronounced risks where conditions have a particular impact on one or more countries or regions.
Counterparty Risk: Risk of material investment exposure through contracts with a third party.
References to specific securities and their issuers are for illustrative purposes only and are not intended and should not be interpreted as recommendations to purchase or sell such securities. The securities referenced may or may not be held in the portfolio at the time of publication and, if such securities are held, no representation is being made that such securities will continue to be held.
The views expressed herein are those of PGIM investment professionals at the time the comments were made, may not be reflective of their current opinions, and are subject to change without notice. Neither the information contained herein nor any opinion expressed shall be construed to constitute investment advice or an offer to sell or a solicitation to buy any securities mentioned herein. Neither PFI, its affiliates, nor their licensed sales professionals render tax or legal advice. Clients should consult with their attorney, accountant, and/or tax professional for advice concerning their particular situation. Certain information in this commentary has been obtained from sources believed to be reliable as of the date presented; however, we cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. The information contained herein is current as of the date of issuance (or such earlier date as referenced herein) and is subject to change without notice. The manager has no obligation to update any or all such information; nor do we make any express or implied warranties or representations as to the completeness or accuracy.
Any projections or forecasts presented herein are subject to change without notice. Actual data will vary and may not be reflected here. Projections and forecasts are subject to high levels of uncertainty. Accordingly, any projections or forecasts should be viewed as merely representative of a broad range of possible outcomes. Projections or forecasts are estimated based on assumptions, subject to significant revision, and may change materially as economic and market conditions change.
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