M&G Launches Two Active ETFs on European AAA CLOs on the LSE

As of June 3, 2026, two new actively managed ETFs from M&G Investments are trading on the London Stock Exchange, both focused on the segment of European Collateralized Loan Obligations (CLOs) with AAA ratings.

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

Joseph Pinto, Chief Executive of M&G Investments

These are the two classes—accumulation and distribution—of the same fund, the M&G European AAA CLO Active UCITS ETF, identified respectively by the ISINs IE000F215NJ2 (EUR Acc) and IE000FMF9DG3 (EUR Dis). For both, the TER is set at 0.25% per annum.

Investment Objective and Policy

The stated objective of the two sub-funds is to generate, over a three-year horizon, a combination of capital growth and income that outperforms the benchmark, the J.P. Morgan European Collateralized Loan Obligation AAA Index. The index serves as a benchmark: the manager retains full discretion in selecting portfolio securities and acknowledges that choices may deviate significantly from the index’s composition, with the consequent possibility of divergent returns.

The policy stipulates that at least 80% of assets must be invested in AAA-rated CLO tranches—actively managed securitized credit instruments backed by diversified pools of typically senior-secured or leveraged loans—assigned by a nationally recognized rating agency. The remaining portion, up to 20%, may be allocated to tranches with a rating of AA- or higher. In the event of a tranche’s downgrade below the AA- threshold, the manager evaluates the position and may proceed with a sale or hold it to maturity, provided that the instrument retains an investment-grade rating and that the decision is deemed to be in the shareholders’ best interest.

At least 80% of CLO exposures are denominated in euros. Positions in other currencies are hedged against the euro. Up to 20% of assets may be invested in other funds, including those managed by M&G or its affiliates, and in cash or readily liquidated instruments. Derivatives are used for risk and cost reduction purposes.

The Selection Process

The manager bases the analysis of individual opportunities on four key elements: the composition of the CLO’s collateral, the transaction structure and its resilience to stress scenarios, contractual documentation, and the relative value of the instrument. This is complemented by a due diligence process on CLO managers, which assesses the platform’s size and market access, investment process, management of non-performing loans, portfolio management and credit analysis systems, approach to ESG criteria, and future issuance capacity.

The competitive landscape

The segment of UCITS ETFs dedicated to European AAA CLOs has seen rapid expansion over the past two years.

The launch of the two M&G sub-funds thus expands an offering in which active management remains predominant. The structural characteristics of AAA CLOs—floating-rate coupons indexed to monetary parameters, low historical credit risk on senior tranches, and a premium relative to traditional investment-grade credit—continue to support European institutional investors’ interest in the asset class, particularly in a rate environment that has normalized compared to the peaks of the previous two years.

Source: ETFWorld.co.uk