In July 2026, investors added $2.3 billion to collateralized loan obligations (CLOs), reflecting a strong demand for these floating-rate securities as interest rates remain elevated. Year-to-date inflows into CLO exchange-traded funds have reached $11.8 billion, according to LSEG data.
The Federal Reserve's current monetary policy, which has maintained steady rates after three cuts in 2025, has created a favorable environment for CLOs, as their coupon payments adjust with short-term interest rate changes.
Analysts from Janus Henderson and Benefit Street Partners emphasize the value of CLOs, suggesting they should be a staple in investment portfolios regardless of interest rate fluctuations, except in the event of a recession. The Janus Henderson AAA CLO ETF (JAAA) has attracted $5.73 billion in inflows this year, boasting a 30-day SEC yield of 4.87%.
While CLOs rated AAA are recommended for most investors due to their lower risk, there are also opportunities in lower-rated CLOs for those seeking higher yields. However, investors are cautioned to understand the associated risks, particularly with lower-rated tranches, as they may introduce more volatility into their portfolios