Collateralized loan obligations could be the next big push in ETFs

Collateralized loan obligations may become the next big push in the exchange-traded fund industry.

VettaFi's Todd Rosenbluth suggests there's investor demand for the alternative assets due to ongoing interest rate uncertainty.

"[CLOs have] been popular within the marketplace," the firm's head of research told CNBC's "ETF Edge" this week.

CLOs are short-term fixed income strategies that consist of pools of floating-rate secured loans. They're designed to deliver relative stability and attractive yields across market cycles.

"We've seen fixed income ETF demand be quite strong," Rosenbluth said. "I think that's going to continue as we're still waiting for some clarity from the next move of the Fed."

Last month's Fed's decision to keep rates unchanged is a catalyst for short-term product demand, according to Rosenbluth.

The industry appears to be acknowledging investor interest. Rosenbluth listed Reckoner Capital Management, an ETF provider specializing in CLOs, as a firm actively creating new CLO ETFs this year.

"That's caught our attention," he said. "It's just great to see the innovation that's happening within the fixed income ETF marketplace."

Jennifer Grancio, global head of distribution at TCW Group, is also seeing a preference to fixed income from an asset manager perspective.

"I think a lot of advisors are holding a core income-oriented portfolio and then dabbling a little bit with short duration or CLO products," she said.