Equities

Janus CLO ETF Tops $10B, Dominates 90% of Market

Janus Henderson's JAAA ETF Hits $10 Billion, Dominates 90% of CLO Market Share

By Max Weldon

6/10, 13:01 EDT
iShares Core U.S. Aggregate Bond ETF
Janus Henderson AAA CLO ETF
Janus Detroit Street Trust Janus Henderson B-BBB CLO ETF
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Key Takeaway

  • Janus Henderson's AAA CLO ETF (JAAA) surpasses $10 billion in assets, dominating 90% of the CLO ETF market.
  • Elevated interest rates boost JAAA's performance, nearly doubling its assets in 2023 and achieving a 9% total return.
  • Citigroup forecasts significant growth for the CLO ETF category, potentially tripling in size and attracting more institutional use cases.

Janus Henderson's Dominance in CLO ETFs

The Janus Henderson AAA CLO exchange-traded fund (ETF), ticker JAAA, has reached a significant milestone by amassing over $10 billion in assets. This achievement solidifies Janus Henderson's dominant position in the market for top-rated collateralized loan obligation (CLO) ETFs, commanding approximately 90% of the market share. The closest competitor in this niche is the Janus Henderson B-BBB CLO ETF (JBBB), which holds around $666 million in assets.

CLOs are bonds backed by leveraged loans that pay floating rates, making them attractive in a rising yield environment. JAAA, which launched in October 2020, offers actively managed exposure to this asset class for a fee of 21 basis points. Despite not being the first or the cheapest fund in the market, JAAA has managed to outpace competitors, including a rival product from BlackRock Inc.

According to a recent Citigroup report, JAAA is currently the only CLO ETF that screens as having an institutional use case, such as hedging. However, this dynamic could evolve as the category is expected to grow significantly. "The CLO category is still in its early innings," Citi strategists, including Drew Pettit, noted. "There is a possibility that more than one product can have an institutional use case, which is common in other credit ETF categories."

Performance and Market Conditions

Elevated interest rates have been particularly beneficial for JAAA, which has nearly doubled its assets in the first half of the year, ending 2023 with about $5.3 billion. Over the past year, the fund has gained approximately 9% on a total return basis, significantly outperforming the iShares Core US Aggregate Bond ETF (AGG), which returned around 2%.

John Kerschner, head of US securitized products at Janus Henderson, highlighted the fund's appeal: "We believe AAA CLOs are an attractive addition to portfolios due to their diversification benefits, low interest rate volatility, attractive returns, and strong credit ratings."

Future Prospects

The future looks promising for the CLO ETF market, with expectations of substantial growth. The Citigroup report suggests that the category could triple in size, potentially allowing for more products to serve institutional use cases. This growth could introduce more competition and innovation within the space, benefiting investors looking for diversified and high-yielding investment options.

Street Views

  • Drew Pettit, Citi (Bullish on the CLO category):

    "The CLO category is still in its early innings. There is a possibility that more than one product can have an institutional use case, which is common in other credit ETF categories."

Management Quotes

  • John Kerschner, Head of US Securitized Products at Janus Henderson:

    "We believe AAA CLOs are an attractive addition to portfolios due to their diversification benefits, low interest rate volatility, attractive returns and strong credit ratings."