Exploring Fixed Income and Debt: Adding CLOZ for Yield Enhancement
In my current fixed income allocation, I primarily use SPDR Bloomberg 1-3 Month T-Bill ETF (BIL) and Alpha Architect 1-3 Month Box ETF (BOXX) at different times, depending on my portfolio’s needs. These ETFs offer stability and liquidity, making them excellent tools for a conservative investment strategy. However, to increase my portfolio’s yield, I’m considering adding the Panagram BBB-B CLO ETF (CLOZ)—acknowledging the higher risk involved.
Current Fixed Income ETFs
- SPDR Bloomberg 1-3 Month T-Bill ETF (BIL):
Managed by State Street Global Advisors, BIL invests in short-term U.S. Treasury bills. Its primary appeal lies in its low risk and regular dividend payouts, which can be reinvested into additional shares. This makes it a great option when I want to take advantage of compounding over time. See BIL on Yahoo Finance. - Alpha Architect 1-3 Month Box ETF (BOXX):
BOXX is an options-based ETF designed to mirror the performance of 1-3 month U.S. Treasury bills. A key advantage of BOXX is that it doesn’t reset due to dividend payouts, meaning it can be purchased at any time without the need to consider dividend schedules. This flexibility makes it a preferred choice when immediate liquidity is a priority. Learn more about BOXX.
Why Add CLOZ?
To To enhance the yield on my fixed income allocation, I’m exploring the Panagram BBB-B CLO ETF (CLOZ). CLOZ is an actively managed ETF that invests in collateralized loan obligations (CLOs) rated BBB to BB. Here’s why it’s an attractive addition:
- Yield Enhancement: CLOZ offers significantly higher yields compared to BIL or BOXX.
- Floating-Rate Structure: Both the CLOs and their underlying loans are floating-rate assets, which mitigates duration risk.
- Low Default Rates: Historically, CLO tranches have shown resilience across multiple credit cycles.
- Diversification: CLOZ’s portfolio is backed by loans from various industries, reducing sector-specific risks.
- Trend Correlation: After experiencing a sustained downtrend in the market(as of 4/24/2025), CLOZ exhibits a degree of correlation with broader trends, making it potentially optimal in a trending market environment.
Adding CLOZ introduces more risk than BIL or BOXX, but it also offers the potential for greater income—making it a calculated trade-off for those comfortable with elevated volatility.
A Balanced Approach
Each of these ETFs serves a specific purpose in my portfolio:
- BIL is ideal for conservative, income-focused strategies, where reinvesting dividends can compound returns over time.
- BOXX provides liquidity and flexibility since it doesn’t reset around dividend payouts, making it a great tool for opportunistic purchases.
- CLOZ offers an opportunity to boost yield, accepting a higher level of risk for those looking to diversify their fixed income exposure.
Further Research
For detailed price charts and performance metrics, visit their respective pages on Yahoo Finance:
- BIL: Yahoo Finance
- BOXX: Yahoo Finance
- CLOZ: Yahoo Finance
By combining these ETFs in a thoughtful manner, I can tailor my fixed income allocation to balance risk, return, and flexibility. Incorporating CLOZ could provide the additional yield my portfolio seeks without overextending its risk profile.
As of January 17, 2025, the Panagram BBB-B CLO ETF (CLOZ) has the following top 10 holdings:
| Holding Name | Weight (%) | Face Value |
|---|---|---|
| U.S. Bank Money Market Deposit Account | 18.43 | $134,198,589 |
| CIFC Funding 2014-II-R LTD / LLC | 0.99 | $7,000,000 |
| REGATTA XXV FUNDING LTD 9.5% | 0.98 | $7,000,000 |
| ORCHARD PARK CLO LTD 7.6% | 0.98 | $7,000,000 |
| Carlyle US CLO 2018-2 LLC 12.64% | 0.85 | $6,000,000 |
| AIG CLO 2019-2 LLC 11.29% | 0.83 | $6,000,000 |
| OHA Credit Partners VI Ltd 7.68% | 0.79 | $5,720,000 |
| OCTAGON 62 LTD 10.91% | 0.76 | $5,500,000 |
| ELMWOOD CLO XII LTD 10.2% | 0.75 | $5,350,000 |
| OHA Credit Funding 3 Ltd/OHA Credit Funding 3 LLC | 0.74 | $5,250,000 |
[Addendum – May 13, 2025]
The broader stock market has been in a steady decline for most of 2025, with signs that a bottom may have formed in April. CLOZ, while a fixed income ETF, has shown a notable correlation with equity market trends. Based on my observations, CLOZ tends to perform better when the market is advancing. This behavior suggests it may be best suited as a yield enhancement tool during risk-on environments rather than as a static fixed income holding. I plan to size my exposure accordingly, aligning CLOZ allocations with broader market momentum.