Generated September 20, 2026.
Overview
CLOZ and JAAA are both ETFs offering monthly distributions from collateralized loan obligations (CLOs)—investment structures that pool corporate loans and issue debt tranches rated by credit rating. The core distinction is credit quality: CLOZ invests in BBB-to-B rated CLO debt tranches and yields 6.77%, while JAAA targets only AAA-rated CLO tranches and yields 4.93%. That gap in yield reflects the default risk baked into CLOZ's lower-rated holdings.
How they differ
The most significant difference is credit quality. CLOZ explicitly targets BBB-to-B rated CLO tranches—the subordinated layers of CLO capital structures that absorb losses before senior tranches. JAAA focuses exclusively on AAA-rated CLOs, the safest tier that sits atop the loss waterfall. That's why CLOZ yields 6.77% versus JAAA's 4.93%: roughly 184 basis points more to compensate for subordination and credit risk.
Second, JAAA is far larger. $31.0B in assets versus $786M for CLOZ, making JAAA one of the largest CLO ETFs available. The size difference also shows in expense ratios: JAAA charges 0.20% while CLOZ costs 0.50%—a meaningful gap for income-focused investors over time.
Third, CLOZ is substantially newer, having launched 3 years, compared to JAAA's 5 years track record. CLOZ's short history means less real-world evidence of its credit performance through a loan cycle or market stress.
Who each is best for
- CLOZ: Fits investors seeking higher current income from CLOs who have an elevated risk tolerance and can stomach potential principal erosion if CLO loan losses spike or if CLO valuations decline. The BBB-to-B tranches appeal to those comfortable with subordinated credit risk in exchange for yield substantially above the AAA tier.
- JAAA: Fits investors prioritizing capital preservation and smooth cash flow over maximum yield. The AAA rating appeals to those who view CLOs as a diversified loan-backed asset class but want the safest tranches, and who value a larger fund with lower costs for long-term holding.
Key risks to know
- CLO loan-loss risk: The underlying corporate loans funding both ETFs are cyclical. Rising defaults or covenant breaches could impair CLO collateral, eroding the value of the tranches each fund holds. CLOZ faces this risk first and most severely, since its subordinated tranches absorb losses before JAAA's senior-rated securities.
- Subordination hierarchy for CLOZ: BBB-to-B tranches sit below investment-grade tranches in the loss waterfall. In a sharp credit downturn, CLOZ could experience rapid NAV decline while JAAA's AAA tranches remain relatively insulated. The 184-basis-point yield premium is the trade-off.
- CLO asset-manager discretion: CLO managers have wide latitude to refinance, swap collateral, and adjust portfolio composition. Poor manager decisions can reduce collateral quality without immediate price signals, creating hidden duration or credit drift risk for both funds.
- Refinancing and extension risk: CLOs refinance periodically. If credit spreads widen or loan supply tightens, refinancing becomes harder or more expensive, potentially extending the fund's effective duration and creating unexpected interest-rate sensitivity.
- Liquidity and bid-ask spread: CLO tranches, especially below investment-grade, trade less frequently than corporate bonds.
Bottom line
CLOZ offers nearly 2% more yield by taking on subordinated credit risk; JAAA prioritizes stability with a lower payout and a much larger, cheaper fund structure. If you're comfortable absorbing CLO loan losses in exchange for higher current income, CLOZ's subordinated tranches reward that risk appetite; if you want CLO exposure with minimal credit erosion risk, JAAA's AAA tranches and 5 years operating history provide a safer, lower-cost path.
AI-generated analysis for educational purposes only. Verify important details independently; past performance does not guarantee future results.
