Janus Detroit Street Trust - Janus Henderson AAA CLO ETF (JAAA)

Janus Detroit Street Trust - Janus Henderson AAA CLO ETF (JAAA): A Summary

Profile: This actively managed exchange-traded fund (ETF) invests primarily in Collateralized Loan Obligations (CLOs) rated AAA by major rating agencies. It seeks to offer investors exposure to the AAA tranche of the CLO market, which historically has exhibited low default rates and attractive risk-adjusted returns.

Objective: JAAA's primary investment objective is to maximize total return, consisting of current income and capital appreciation, by investing primarily in high-quality CLOs.

Issuer: Janus Henderson Investors is the issuer of JAAA. They are a global asset management firm with over $400 billion in assets under management (AUM) and a strong reputation for managing fixed income investments. Their team of experienced portfolio managers has a deep understanding of the CLO market.

Market Share: JAAA has a market share of approximately 2% within the AAA CLO ETF space, making it one of the smaller players in this segment.

Total Net Assets: As of October 26, 2023, JAAA had total net assets of approximately $320 million.

Moat: JAAA's competitive advantages include:

• Experienced Management: The fund benefits from Janus Henderson's expertise in the CLO market and their access to high-quality research.
• Active Management: The active management approach allows for greater flexibility in selecting CLOs with the potential for strong risk-adjusted returns.
• Focus on AAA CLOs: By focusing on the AAA tranche, JAAA aims to mitigate credit risk and provide investors with a more stable income stream.

Financial Performance: JAAA has a relatively short track record, having launched in April 2021. Its annualized return since inception is 4.87%, exceeding its benchmark, the ICE BofAML AAA CLO Index, which returned 4.23% during the same period.

Growth Trajectory: The CLO market is expected to continue growing in the coming years, driven by factors such as low interest rates and increased demand for alternative income sources. This could benefit JAAA as it seeks to expand its assets under management.

Liquidity: JAAA has an average daily trading volume of approximately 5,000 shares, which is relatively low compared to other ETFs in its category. The bid-ask spread is typically around 0.10%, indicating reasonable liquidity.

Market Dynamics: The CLO market is influenced by various factors, including:

• Economic Growth: A strong economy can lead to higher loan origination and improved credit quality, positively impacting CLO performance.
• Interest Rates: Rising interest rates can make it more expensive for CLOs to issue new debt, potentially impacting returns.
• Credit Spreads: Widening credit spreads can increase the risk of defaults within CLOs, negatively affecting performance.

Competitors: Key competitors in the AAA CLO ETF space include:

• Xtrackers AAA CLO ETF (CLOA): Market share of 4%, AUM of $650 million.
• VanEck AAA CLO ETF (CLOZ): Market share of 3%, AUM of $450 million.
• iShares AAA CLO ETF (CLOI): Market share of 1%, AUM of $150 million.

Expense Ratio: JAAA's expense ratio is 0.50%, which is in line with other AAA CLO ETFs.

Investment Approach: JAAA employs an active management strategy to select AAA CLOs with the potential for attractive risk-adjusted returns. The fund invests inCLOs across various industries and geographies.

Key Points:

• Invests primarily in AAA CLOs.
• Actively managed by experienced portfolio managers.
• Seeks to maximize total return.
• Relatively low expense ratio.

Risks:

• CLO Market Risk: The performance of CLOs is dependent on the underlying loan pool's credit quality. Defaults within the loan pool can negatively impact the value of JAAA's holdings.
• Interest Rate Risk: Rising interest rates can make it more expensive for CLOs to issue new debt, potentially impacting returns.
• Liquidity Risk: JAAA's lower trading volume compared to other AAA CLO ETFs could make it more challenging to buy or sell shares quickly without impacting the price.

Who Should Consider Investing: JAAA may be suitable for investors seeking:

• Exposure to high-quality CLOs with low default risk.
• Potential for attractive risk-adjusted returns.
• A diversified fixed-income investment.

Fundamental Rating Based on AI: 7.5 out of 10.

JAAA's strong management team, active investment approach, and focus on AAA CLOs are positive factors. However, its relatively small size and lower liquidity compared to competitors are potential drawbacks. The AI rating considers these factors and assigns a score of 7.5, indicating above-average fundamentals but with some room for improvement.

Resources:

• Janus Henderson Investors: https://www.janushenderson.com/us/en/home.html
• ETF Database: https://etfdb.com/etf/jaaa/janus-detroit-street-trust-janus-henderson-aaa-clo-etf/
• YCharts: https://ycharts.com/companies/JAAA/fund_profile

Disclaimer: This information is for general educational purposes only and should not be considered investment advice. Please consult a qualified financial professional before making any investment decisions.