PGIM launches AAA CLO ETF (PAAA) and short duration multi-sector ETF (PSDM)

PGIM, the $1.2 trillion global investment management business of Prudential Financial, Inc. (NYSE: PRU) has launched the PGIM AAA CLO ETF (NYSE Arca: PAAA), offering retail investors direct access to the growing $1.2 trillion collateralized loan obligation (CLO) market, historically accessible only to institutional investors.

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Edwin Wilches, CFA, Managing Director and Co-Head of Securitized Products, PGIM Fixed Income (Photo: Business Wire)

PAAA is subadvised by PGIM Fixed Income, one of the largest and most experienced securitized credit and leveraged finance managers with $101 billion in securitized credit assets under management, including $55 billion in CLO tranches.¹ While the ETF represents a new retail offering for the firm, PGIM Fixed Income has been managing sleeves of high-grade CLOs within their investment strategies for more than 15 years, with a team of 27 investment professionals dedicated to the securitized credit space.

“The CLO market has evolved since the Global Financial Crisis and represents an enormous, relatively untapped opportunity for retail investors. High-quality CLOs offer one of the best relative value trades in the fixed income market today given their attractive yield potential, floating rate coupons, and credit protection in AAA tranches,” according to Edwin Wilches, co-portfolio manager of the PGIM AAA CLO ETF. In addition to Wilches, the ETF is managed by Gabriel Rivera and Connor Byrnes.

Competitively priced with a net expense ratio of 0.19%, PAAA seeks to maximize total return through a combination of current income and capital appreciation, investing primarily in U.S. CLOs rated AAA or equivalent. The Fund will invest predominantly in the senior tranches of CLOs which ordinarily have the highest ratings, the lowest level of risk and the lowest relative yields.

“As we remain in a period of economic uncertainty with tighter financial conditions and corporate defaults expected to increase, high-quality CLOs have the potential to insulate an investor’s portfolio while providing diversification benefits with less idiosyncratic risk and the potential for attractive risk-adjusted returns,” Wilches added.

In addition to PAAA, PGIM has also launched the PGIM Short Duration Multi-Sector Bond ETF (Cboe BZX: PSDM), which seeks to provide total return, allocating its investments across different sectors of the fixed income market with an average portfolio duration of three years or less. The fund closely mirrors the existing $2.9 billion PGIM Short Duration Multi-Sector Bond Fund.

Both the mutual fund and ETF are managed by Gregory Peters, Robert Tipp and Richard Piccirillo.

“Active ETFs are one of the fastest growing segments of the ETF market today. PGIM will continue to aggressively expand its suite of products to meet this client demand by either offering new ways to access the market or expanding access to our flagship strategies,” added Stuart Parker, president and CEO of PGIM Investments.

With the addition of these new funds, PGIM Investments now offers investors 10 actively managed ETFs across fixed income, equities, and multi-asset solutions. Learn more about PGIM’s active ETF suite.

ABOUT PGIM INVESTMENTS

PGIM Investments LLC and its affiliates offer more than 100 funds globally across a broad spectrum of asset classes and investment styles. All products draw on PGIM’s globally diversified investment platform that encompasses the expertise of managers across fixed income, equities, alternatives, and real estate.

ABOUT PGIM FIXED INCOME

PGIM Fixed Income, with $793 billion in assets under management as of March 31, 2023, is a global asset manager offering active solutions across all fixed income markets. The company has offices in Newark, N.J., London, Amsterdam, Zurich, Munich, Singapore, Hong Kong, and Tokyo. For more information, visit pgimfixedincome.com.

ABOUT PGIM

PGIM is the global asset management business of Prudential Financial, Inc. (NYSE: PRU), a leading global investment manager with more than $1.27 trillion in assets under management as of March 31, 2023. With offices in 18 countries, PGIM’s businesses offer a range of investment solutions for retail and institutional investors around the world across a broad range of asset classes, including public fixed income, private fixed income, fundamental equity, quantitative equity, real estate and alternatives. For more information about PGIM, visit pgim.com.

Prudential Financial, Inc. (PFI) of the United States is not affiliated in any manner with Prudential plc, incorporated in the United Kingdom, or with Prudential Assurance Company, a subsidiary of M&G plc, incorporated in the United Kingdom. For more information, please visit news.prudential.com.

Consider a fund’s investment objectives, risks, charges, and expenses carefully before investing. The prospectus and summary prospectus contain this and other information about the fund. Contact your financial professional for a prospectus and summary prospectus. Read them carefully before investing.

Past performance is not a guarantee or a reliable indicator of future results.

Investing in mutual funds and ETFs involves risks. Some funds have more risk than others. The investment return and principal value will fluctuate and shares when sold may be worth more or less than the original cost and it is possible to lose money. Diversification and asset allocation do not assure a profit or protect against loss in declining markets. There is no guarantee that a Fund’s objectives will be achieved. The risks associated with each fund are explained more fully in each fund’s respective prospectus.

Fixed income investments are subject to credit, market, and interest rate risks (including duration risk and prepayment risk), and their value will decline as interest rates rise; call and redemption risk, where the issuer may call a bond held by the Fund for redemption before it matures and the Fund may lose income; liquidity risk, which exists when particular investments are difficult to sell; and emerging markets risk, which exposes the Fund to greater volatility and price declines.

The new Funds are actively managed exchange traded funds (ETFs); the Funds are subject to risks involved with: actively and frequently trading; ETF shares trading risk (including the risk of the shares trading at a premium or discount to net asset value or the lack an active trading market); authorized participant concentration risk; the risk of transacting in cash versus in-kind; as well as the risk of increased expenses and the cost of buying or selling shares through a broker. As new and relatively small funds with limited operating history, the Funds are subject to the risk that its performance might not represent how it may perform long term and investments may have disproportionate impact on performance.

Large shareholders could subject the Funds to large scale redemption risk. The risks associated with the Funds are more fully explained in the prospectus and summary prospectus. These risks may increase the Funds’ share price volatility. There is no guarantee the Funds’ objective will be achieved.

PGIM AAA CLO ETF FUND RISKS

The Fund invests primarily in collateralized loan obligations (“CLOs”) which are subject to credit, interest rate, valuation, and prepayment and extension risks. These securities also are subject to risk of default on the underlying asset, particularly during periods of economic downturn. CLO managers may have limited operating histories and may be subject to conflicts of interest. The Fund is subject to covenant-lite risk, which means the loans or obligations contain fewer financial maintenance covenants than other loans or obligations (in some cases, none) and do not include terms which allow the lender to monitor the borrower’s performance and declare a default if certain criteria are breached; call and redemption risk, where the issuer may call a bond held by the Fund for redemption before it matures and the Fund may lose income; market risks, including economic risks, as well as market disruption and geopolitical risks (the value of investments may decrease, and international conflicts and geopolitical developments may adversely affect the U.S. and foreign financial markets, including increased volatility); liquidity risk, which exists when particular investments are difficult to sell (loans are subject to legal or contractual restrictions on resale); reference rate risk, in which the Fund may be exposed to financial instruments that recently transitioned from using or continue to use the London Interbank Offered Rate (“LIBOR”) to determine payment obligations, financing terms, hedging strategies or investment value; management risk in which the subadviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but the subadviser’s judgments about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements may be incorrect; and interest rate risk in which the value of your investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration debt securities. The Fund may lose money if short-term or long-term interest rates rise sharply or in a manner not anticipated by the subadviser. The Fund may invest in derivative securities, which may carry market, credit, and liquidity risks; emerging markets, which typically have economic and political systems that are less fully developed, and can be expected to be less stable, than those of more developed countries; and foreign or non-U.S. securities, which are subject to the risks of currency fluctuation and political uncertainty. The Fund is non-diversified for purposes of the 1940 Act.. Investing in a non-diversified fund involves greater risk than investing in a diversified fund because a loss resulting from the decline in value of any one security may represent a greater portion of the total assets of a non-diversified fund.

PGIM SHORT DURATION MULTI-SECTOR BOND ETF FUND RISKS

The Fund is subject to currency risk, in which the Fund’s net asset value could decline as a result of changes in exchange rates, which could adversely affect the Fund’s investments in currencies, or in securities that trade in, and receive revenues related to, currencies, or in derivatives that provide exposure to currencies; debt obligation risk, in which the Fund’s holdings, share price, yield and total return may also fluctuate in response to bond market movements; call and redemption risk, where the issuer may call a bond held by the Fund for redemption before it matures and the Fund may lose income; and liquidity risk, which exists when particular investments are difficult to sell; management risk in which the subadviser will apply investment techniques and risk analyses in making investment decisions for the Fund, but the subadviser’s judgments about the attractiveness, value or market trends affecting a particular security, industry or sector or about market movements may be incorrect; reference rate risk, in which the Fund may be exposed to financial instruments that recently transitioned from using or continue to use the London Interbank Offered Rate (“LIBOR”) to determine payment obligations, financing terms, hedging strategies or investment value;; and interest rate risk in which the value of your investment may go down when interest rates rise. A rise in rates tends to have a greater impact on the prices of longer term or duration debt securities. The Fund may invest in high yield ("junk") bonds, which are subject to greater credit and market risks; foreign securities, which are subject to currency fluctuation and political uncertainty; mortgage-backed and asset-backed securities, which are subject to prepayment, extension, and interest rate risks; floating rate loans, which subjects the Fund to the risk that the Fund’s ability to receive payments in connection with loans depends on the financial condition of the borrower (failure to receive such payments may reduce the value of the Fund’s assets); the value of adjustable and floating rate securities may lag behind the value of fixed rate securities when interest rates change; certain loans or obligations in which the fund may invest may be “covenant-lite” meaning they contain fewer financial maintenance covenants than other loans or obligations; and derivative securities, which may carry market, credit, and liquidity risks. To the extent the Fund invests in U.S. government and agency securities, its potential for capital appreciation may be limited. The Fund is subject to market risks, including economic risks, as well as market disruption and geopolitical risks (the value of investments may decrease, and international conflicts and geopolitical developments may adversely affect the U.S. and foreign financial markets, including increased volatility). These risks may increase the Fund’s share price volatility. The Fund may not be invested in all sectors at a given time. Diversification does not assure a profit or protect against loss in declining markets.

Funds are distributed by Prudential Investment Management Services LLC, a Prudential Financial company. PGIM Fixed Income is an affiliate of PGIM. © 2023 Prudential Financial, Inc. and its related entities. The PGIM logo is a service mark of Prudential Financial, Inc. and its related entities, registered in many jurisdictions worldwide.

Investment products are not insured by the FDIC or any federal government agency, may lose value, and are not a deposit of or guaranteed by any bank or any bank affiliate.

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