M&G AAA CLO ETF lists sterling and dollar-hedged share classes on the London Stock Exchange

M&G Investments has listed two new currency-hedged share classes of its M&G European AAA CLO Active UCITS ETF on the London Stock Exchange (LSE) on 27 October 2026.

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Article created by the editorial staff of ETFWorld.co.uk

Joseph Pinto, Chief Executive of M&G Investments

The GBP-Hedged Acc class (ISIN IE000GQZOV41) and the USD-Hedged Acc class (ISIN IE000XY844X6) are both accumulating and carry a total expense ratio (TER) of 0.28%. The fund invests mainly in AAA-rated tranches of European collateralised loan obligations (CLOs). The new classes extend the actively managed fixed income ETF, which launched in euros in May 2026, to investors who measure returns in sterling or US dollars.

Two hedged share classes for the M&G AAA CLO ETF

The two classes share the same portfolio as the existing euro share classes. They differ only in currency, hedging and cost.

GBP-Hedged Acc              USD-Hedged Acc

Full name            M&G European AAA CLO Active UCITS ETF GBP-H Acc     M&G European AAA CLO Active UCITS ETF USD-H Acc

ISIN       IE000GQZOV41 IE000XY844X6

Share class currency       GBP       USD

Currency hedged             Yes         Yes

Use of income   Accumulating    Accumulating

TER        0.28%   0.28%

Initial offer price               GBP 10 USD 10

The fund is a sub-fund of M&G (Ireland) ETF ICAV, an Irish umbrella vehicle authorised by the Central Bank of Ireland under the UCITS rules. Its base currency is the euro.

According to the sub-fund’s prospectus supplement dated 17 April 2026, the two euro share classes (Acc and Dist) carry a TER of 0.25%. The hedged classes cost three basis points more.

Investment policy: at least 80% in AAA-rated CLO tranches

The fund aims to deliver a higher total return, through a combination of capital growth and income, than its benchmark over any three-year period.

Its investment limits are:

at least 80% of net asset value (NAV) in AAA-rated tranches of CLOs;

up to 20% of NAV in CLOs rated AA- or higher;

at least 80% of the CLOs held denominated in euros;

up to 20% of NAV in cash and near-cash assets;

investment in other collective investment schemes exposed to similar assets, capped at 10% of NAV by the supplement.

If a CLO is downgraded below AA-, M&G will assess its credit standing as soon as possible and may take appropriate action. The supplement states that the fund may either sell the position or, provided the CLO keeps at least an investment grade rating, hold it to maturity.

CLOs are securitisations backed by pools of loans, typically senior secured leveraged loans to companies. The cash flows are divided into tranches with different ratings. AAA tranches are the most senior: they receive payments first and absorb losses last. Coupons are usually floating rate, linked to Euribor for euro deals or SOFR for dollar deals.

The fund may invest only in CLOs whose originator, sponsor or original lender retains a net economic interest of at least 5%, as required by the EU Securitisation Regulation (EU 2017/2402).

Currency hedging at two levels

Hedging operates at two levels in this fund.

At portfolio level, the fund aims to hedge any non-euro assets back to the euro. This applies to all share classes and covers the up to 20% of CLOs that may be issued in other currencies.

At share class level, the GBP and USD classes are designated as currency hedged in the prospectus supplement. Their aim is to reduce the effect of movements between the euro and sterling, or the euro and the dollar, on the returns of UK and dollar-based investors.

Benchmark and active management of the AAA CLO ETF

The benchmark is the J.P. Morgan European Collateralized Loan Obligation AAA Index. According to the supplement, it tracks broadly syndicated, arbitrage, euro-denominated AAA-rated CLO debt drawn from J.P. Morgan’s European CLOIE Index.

The benchmark serves only as a comparator. It does not constrain portfolio construction. The manager has full discretion over what to buy, hold and sell, and holdings may differ significantly from the index constituents. M&G states that it expects to outperform the benchmark net of fees, but there is no guarantee that it will.

How the manager selects CLOs

The supplement describes a selection process in two stages.

First, the CLO manager must pass M&G’s due diligence screening. This covers the scale and resources of the manager’s platform, its investment process, its handling of underperforming credits and its trading systems.

Deals from approved managers are then assessed on four pillars:

the composition of the collateral, analysed loan by loan;

the structure of the deal and its resilience under stress, including scenarios of early elevated defaults and large rating downgrades;

the legal documentation, with a focus on risk retention, extension risk and cash leakage to equity holders;

relative value against recent new issues and secondary market spreads.

M&G uses a proprietary portfolio management and risk tool, CYCLO, to monitor collateral quality and CLO manager activity in real time. The fund publishes its full holdings daily.

Risk framework and use of derivatives

The fund may use derivatives for efficient portfolio management and hedging. Permitted instruments are spot and forward contracts, options, exchange-traded futures, credit default swaps and interest rate swaps.

Global exposure is measured with the absolute value-at-risk (VaR) approach. Daily VaR may not exceed 10%, based on a 20-business-day holding period and a 99% one-tailed confidence level. Expected leverage, calculated as the sum of notionals, is up to 70% of NAV, mainly as a result of derivative use. The fund does not engage in securities lending, total return swaps or repurchase agreements.

The manager has classified the fund under Article 6 of the EU Sustainable Finance Disclosure Regulation (SFDR). The fund integrates sustainability risks into its investment process but does not promote environmental or social characteristics.

Who the GBP-hedged CLO ETF is designed for

The prospectus supplement describes the fund as suitable for professional, institutional and retail investors with “Advanced” knowledge under the European MiFID template.

The fund is not suitable for “Basic Investors”. Sales to this category on the secondary market are not permitted, and the fund will not be offered to retail investors on an execution-only basis.

On the primary market, the minimum subscription and redemption amount is 50,000 shares. On the secondary market, including the London Stock Exchange, investors can trade any amount permitted by the exchange.

Conclusions

From 27 October 2026, the M&G European AAA CLO Active UCITS ETF is available on the London Stock Exchange in GBP-hedged and USD-hedged accumulating share classes, both with a TER of 0.28%. The portfolio is unchanged: at least 80% in AAA-rated CLO tranches, at least 80% of CLOs in euros, and active management against the J.P. Morgan European CLO AAA Index.

The new classes allow sterling and dollar investors to hold the strategy without direct euro exposure. Access remains limited to investors with advanced knowledge, in line with the fund’s target market.

Source: ETFWorld.co.uk