Franklin Templeton has entered the rapidly expanding collateralized loan obligation (CLO) ETF space with the launch of its first fund dedicated to this alternative asset class. The Franklin BSP CLO ETF, trading under the ticker YCLO, is an actively managed vehicle that seeks capital preservation and current income by investing in CLO debt tranches across both U.S. and European markets.
The fund is managed by Franklin Advisers, Inc., with sub-advisory services provided by Benefit Street Partners (BSP), a credit-focused asset manager within the Franklin Templeton ecosystem. YCLO marks BSP's first foray into the ETF structure, a move that reflects the growing convergence of private credit strategies with the liquidity and transparency of exchange-traded funds.
Brandon Chao, portfolio manager at BSP Structured Credit, noted in a statement that the CLO market and its investor base have continued to expand, while performance across CLO securities has become more differentiated in the current environment. This differentiation, he said, creates opportunities for BSP to apply its global relative value approach and active risk management within an ETF wrapper.
The CLO ETF category has emerged as one of the fastest-growing segments in the broader ETF market. According to the London Stock Exchange Group (LSEG), net inflows into CLO ETFs totaled $4 billion in the first six weeks of 2026 alone. That surge pushed global assets in CLO ETFs above $35 billion, representing a year-over-year doubling of assets under management.
Franklin Templeton's move comes amid a broader industry push to democratize access to private credit. The firm has been actively expanding its alternatives offerings, including through initiatives such as AI-driven investment tools and a recent call for advisors to rethink the traditional 60/40 portfolio in favor of more diversified allocations.
The launch also comes at a time when regulators are scrutinizing private credit disclosures. The SEC recently swept 14 funds for potential disclosure lapses, signaling heightened oversight in the space. Despite this, demand for CLO ETFs continues to climb as advisors seek yield in a higher-for-longer rate environment.
YCLO's active management approach differentiates it from many passive CLO ETFs already on the market. BSP's structured credit team will apply a relative value framework to select CLO tranches, aiming to capture attractive risk-adjusted returns while managing downside exposure. The fund's dual focus on U.S. and European markets also provides geographic diversification.
Industry observers note that the CLO ETF boom reflects a broader trend of alternative assets migrating into ETF structures. As the category matures, more asset managers are likely to follow Franklin Templeton's lead, particularly as advisor demand for liquid alternatives grows. The $35 billion milestone, achieved in just over a year, underscores the pace of adoption.
