AAA vs PAAA

AAACAlternative Access First Priority CLO Bond ETF

PAAAAPGIM AAA CLO ETF

In short

AAA Launched in 2020, this small independent fund holds roughly 30 first-priority CLO bonds and pays monthly, with capital preservation and income as its stated goal. At 0.19% it undercuts most of the big-name CLO ETFs that now crowd the category.

PAAA PGIM's entry in the AAA CLO race: an actively run book of the senior-most slice of collateralized loan obligations, floating-rate, priced at 0.19%, paid out monthly. Same playbook as the category's biggest names, a hair cheaper.

Stated mandate

AAA The Fund seeks capital preservation and income.

PAAA The Fund seeks to maximize total return through current income and capital appreciation. It invests primarily in U.S. dollar-denominated AAA-rated CLOs and is actively managed rather than designed to replicate a specific index.

Why people hold it

• AAA 0.19% a year, under the 0.25% CLO ETF median and a hair below CLOA, JAAA, FAAA and ACLO at 0.20%. Fee is one of the few fixed quantities in a capital-preservation product.
• The mandate is plain: capital preservation and income from first-priority CLO bonds, the senior slice of the structure that stands first in line to be paid.
• Income lands monthly, and the book stays tight at roughly 30 positions, so what sits inside is easy to see rather than buried in hundreds of line items.
• A boutique shop in a peer group otherwise stacked with BlackRock, Janus Henderson, PGIM, Fidelity and TCW. Different house, same senior-tranche corner of credit.

• PAAA At 0.19%, one of the cheapest tickets into AAA CLOs, undercutting the 0.20% charged by CLOA, JAAA, FAAA and ACLO and sitting well below the category median.
• Keeps at least 80% of investable assets in US dollar CLOs rated AAA at purchase, the tranche that stands first in line for cash from the underlying loan pool.mutualfunds.compgim.com
• CLO coupons float, so the income stream resets with short-term rates rather than locking to a fixed coupon. Cash goes out monthly.pgim.com
• A multi-billion-dollar fund that trades actively, with spread and execution behavior among the strongest in its peer group.

Worth knowing

• AAA Small and thinly traded next to JAAA, CLOA and PAAA, so bid-ask spreads can run wider and sizable orders need more care at the point of trade.
• Roughly 30 positions means each bond carries real weight. Less spreading of risk than a portfolio holding hundreds of deals.
• Capital preservation is the stated objective, not a promise. These are floating-rate corporate credit instruments and their prices move.

• PAAA Actively managed against the JP Morgan CLOIE AAA Index, not built to match it. Holdings and results can diverge from the benchmark by design.
• The AAA stamp sits atop a pool of leveraged loans to below-investment-grade borrowers, and up to 20% of investable assets can go outside AAA-rated CLOs.mutualfunds.com
• Launched in 2023, so the track record is short and does not yet span a full credit cycle.

Full AAA profile⁠

Full PAAA profile⁠