Janus Henderson targets riskier CLOs in latest ETF

Jan 17th, 2022 | By | Category: Fixed Income

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Janus Henderson has launched its second fixed income ETF providing actively managed exposure to collateralized loan obligations (CLOs).

Nick Cherney, Head of ETPs at Janus Henderson Investors

Nick Cherney, Head of ETPs at Janus Henderson.

Listed on Cboe BZX Exchange, the Janus Henderson B-BBB CLO ETF (JBBB US) targets CLOs with credit ratings between B- and BBB+ inclusive.

The launch follows the October 2020 introduction of the Janus Henderson AAA CLO ETF (JAAA US) which uses active management to target opportunities in CLOs with the highest credit ratings.

JAAA has been warmly received by investors, accumulating $400 million in assets since its launch. JAAA comes with an expense ratio of 0.25%.

Nick Cherney, Head of Exchange Traded Products at Janus Henderson, said: “The client reception for our pioneering launch of JAAA has been strong, and investors are looking for additional tools to manage the duration and income puzzle of the current market environment. JBBB will allow investors the potential to access yield while keeping exposure to floating rates and the unique structural profile of CLOs.”

CLOs are floating-rate debt securities issued in different tranches by a trust or other special purpose vehicle and backed by an underlying portfolio consisting typically of below-investment-grade corporate loans.

The underlying loans, which are selected by a CLO’s manager, typically include domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans.

CLOs, which have historically been available only to institutional investors, may help diversify a traditional fixed income portfolio, while floating-rate coupons can help limit the negative portfolio impacts of rising interest rates.

The new fund invests primarily in US dollar-denominated CLOs of any maturity that have total amounts outstanding of at least $250 million. It principally targets CLOs at the higher end of the permissible credit rating mandate. Specifically, no more than 15% of the portfolio will be invested in CLOs rated below investment-grade (below BBB-), while up to 10% may be allocated to CLOs with ratings above BBB+.

Day-to-day operations of the fund are overseen by Portfolio Managers John Kerschner and Nick Childs, and Associate Portfolio Manager Jessica Shill.

John Kerschner said: “JBBB provides exposure to the floating rate CLO market in a liquid, transparent manner. We believe our rigorous due diligence and portfolio construction process can provide competitive risk-adjusted returns and low correlation to traditional fixed income asset classes.”

The new ETF comes with an expense ratio of 0.49%. Distributions are made on a monthly basis.

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