(PAAA) PGIM Trust - Ratings and Ratios

The PGIM ETF Trust (NYSE ARCA: PAAA) is a targeted fixed-income ETF designed to capitalize on the stability of AAA-rated collateralized loan obligations (CLOs). Under normal market conditions, the fund allocates at least 80% of its investable assets to U.S. dollar-denominated CLOs that carry a AAA rating from at least one nationally recognized statistical rating organization (NRSRO) or are deemed equivalent in quality by the subadviser if unrated. This focus on high-quality CLOs is intended to provide investors with exposure to senior secured loans, which historically offer attractive risk-adjusted returns with lower volatility compared to other fixed-income assets.

As a non-diversified fund, PAAA can take larger positions in individual securities, which may enhance returns but also increases concentration risk. The funds ultrashort bond category classification reflects its low-duration profile, making it less sensitive to interest rate fluctuations. This structure is particularly appealing in rising rate environments, as it reduces the impact of duration-related losses. With an assets under management (AUM) of approximately $2.228 billion, PAAA operates at a scale that ensures liquidity and market presence, which is critical for maintaining tight bid-ask spreads and efficient trading.

For investors and fund managers, PAAA offers a way to access the CLO market, which is typically dominated by institutional players. CLOs are structured finance products that pool together leveraged loans, offering a tranched debt structure where the AAA-rated tranche is the most senior and has the lowest risk of default. By focusing on this tranche, the fund aims to deliver consistent income with a strong credit profile. However, it’s important to note that while the fund’s CLO exposure is high quality, the underlying collateral—leveraged loans—carries its own risks, including default and recovery rates.