On Thursday, Palmer Square Capital Management launched two new ETFs. These funds are the Palmer Square Credit Opportunities ETF (PSQO) and the Palmer Square CLO Senior Debt ETF (PSQA).
“Our deep experience in managing opportunistic multi-asset credit strategies and funds across the spectrum of corporate and structured credit as well as our market-leading expertise in structuring, managing, and issuing CLOs ensures our ETFs are designed with a keen understanding of the market’s complexities and opportunities,” noted Chris Long, Palmer Square chairman and CEO.
Versatile Income Strategy
PSQO is designed to generate a strong level of current income for its investors. The fund also has a secondary goal of providing capital appreciation in the long term. In terms of investor costs, PSQO has a net expense ratio of 0.50%.
A large majority of the fund’s net assets are allocated toward debt securities. These debt securities can include corporate bonds, collateralized loan obligations (CLOs), and collateralized debt obligations, among others.
In choosing assets to add for the fund, PSQO uses a top-down macro and relative value analysis. This is paired with a bottom-up analysis that scrutinizes issuer fundamentals to find stronger potential yield.
Per PSQO’s fund prospectus, the fund may invest in securities regardless of credit quality or maturity. Additionally, eligible debt securities can be domestic or foreign-issued.
PSQO’s strategy has the added benefit of an active portfolio management team. With an active team at the helm, PSQO can seek out opportunistic gains while potentially mitigating risk.
Focusing on CLOs
While PSQO operates with an active team, PSQA opts for a passive strategy. The fund aspires to provide similar results to that of the Palmer Square CLO Senior Debt Index. PSQA’s net expense ratio is 0.20%.
The Palmer Square CLO Senior Debt Index uses a rules-based methodology to track CLO debt available for sale in the United States. Eligible CLOs for the index must be floating rate tranches of “arbitrage” CLOs.
Additionally, the CLOs must have a closing date on or after January 1, 2009, and meet the index’s minimum deal size. The index will be rebalanced at the end of the last business day for each quarter.
To generate exposure toward the Palmer Square index, PSQO uses a representative sampling strategy. At times, the fund may use different strategies than the index, including changing component weights or adding securities outside of the index.
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