Janus Henderson has filed a preliminary registration statement with the U.S. Securities and Exchange Commission for the Janus Henderson AAA CLO ETF (JAAA US).
Janus Henderson is set to launch the world’s first CLO ETF.
The actively managed ETF will invest in Collateralized Loan Obligations (CLOs) and is expected to be the first of its kind in the industry.
It will list on the NYSE Arca.
The investment objective of the fund will be to seek capital preservation and current income by seeking to deliver floating-rate exposure to high quality AAA-rated CLOs.
CLOs are debt securities issued in different tranches, with varying degrees of risk, by a trust or other special purpose vehicle and backed by an underlying portfolio consisting primarily of below-investment-grade corporate loans.
Such loans may include domestic and foreign senior secured loans, senior unsecured loans and subordinate corporate loans, some of which may individually be rated below investment grade or the equivalent if unrated. The underlying loans are selected by a CLO’s manager.
According to the filing, the fund will seek to maintain a minimum of 80% of its portfolio in AAA-rated CLOs under normal market conditions. The fund may temporarily deviate from the 80% policy, however, while deploying new capital as the result of cash creation or redemption activity, or during highly unusual market conditions, such as a downgrade in the rating of one or more securities.
The fund may invest its remaining assets in other high-quality CLOs with a minimum rating of A- at the time of purchase. After purchase, a CLO may have its rating reduced below the minimum rating required by the fund for purchase. In such cases, the fund will consider whether to continue to hold the CLO.
The fund will only invest in CLOs with a minimum initial total offering size of $250 million and a minimum initial AAA tranche size of $100m. And it will not invest more than 5% of its portfolio in any single CLO or more than 15% of its portfolio in CLOs managed by a single CLO manager.
The fund will invest primarily in CLOs that are US dollar-denominated but may from time to time invest up to 30% of its net assets in CLOs that are denominated in foreign currencies. When it does so, the fund will seek to hedge foreign exchange exposure.
The fund may purchase CLOs both in the primary and secondary markets.
The fund will be managed by portfolio managers John Kerschner and Nick Childs and who will apply a bottom-up approach to selecting investments to purchase and sell.
If all approvals are granted, the fund is expected to debut on or around October 22, 2020.
Details of management fees have not yet been disclosed.