LONZ: Highest-Yielding, Best-Performing Senior Loan ETF, But Better Choices Out There
The PIMCO Senior Loan Active Exchange-Traded Fund ETF is an active senior loan ETF managed by PIMCO. The fund provides diversified exposure to these high-yield investments, with an 8.6% dividend yield, and a 7.3% yield to maturity. It has outperformed most other senior loan ETFs since inception, with spottier performance relative to higher-yield CLO ETFs.
LONZ: The Reward Is Not Commensurate With The Risk (Rating Downgrade)
Downgrade LONZ to 'Sell' as the current 6.11% yield is insufficient for single-B risk in today's macro environment. Fund's low historical drawdown (-4%) may not hold in a recession; expect up to -10% downside in economic contraction. High expense ratio and floating rate sensitivity mean yields will drop further when the Fed cuts rates, worsening risk/reward.
LONZ: Lower Fed Funds Make This Name A Hold (Rating Downgrade)
We are downgrading the PIMCO Senior Loan Active Exchange-Traded Fund to 'Hold' due to ongoing monetary easing and decreasing yields. The Fed's rate cuts have significantly lowered the yield curve, impacting LONZ's dividend yield, which is set to decline further. The Fund's overweight position in single-B credits, combined with historically low credit spreads, presents heightened risk in a potential recessionary scenario.
LONZ: A Throughout-The-Cycle Asset
The PIMCO Senior Loan Active ETF offers prudent exposure with low price risk and high-income attributes. LONZ's near-zero effective duration and diversified corporate bank loans portfolio mitigate interest rate sensitivity, which I deem beneficial in today's uncertain economic environment. Despite investing in non-investment-grade loans, LONZ's position in the debt waterfall structure, compelling forward dividend yield, and potential for enhanced net income translate into play into a favorable trajectory.
LONZ: High Yield From Leveraged Loans
The LONZ ETF is an actively managed portfolio of leveraged loans. Adjusted for leverage, LONZ's performance appears identical to a passive leveraged loan ETF. With a looming economic slowdown, investors may want to consider higher credit-quality investments like the JAAA ETF.
