Janus ETF Tracker CLOs Hit $10 Billion in Zero-Sum Race

(Bloomberg) — The largest ETF tracking collateralized loan obligations has reached $10 billion in assets, helping Janus Henderson further tighten its grip on the fast-growing niche.

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The Janus Henderson AAA CLO exchange-traded fund (ticker JAAA) now holds more than $10 billion in assets, giving it about 90% market share of top-rated CLO ETFs, according to a Monday press release . Its closest runner-up among the dozen CLO funds is the Janus Henderson B-BBB CLO ETF (JBBB), which has raised about $666 million.

The asset manager has dominated the field of ETFs holding CLOs, which are bonds backed by leveraged loans that pay variable rates, meaning they generate more income as yields rise. Although JAAA is neither the first mover nor the cheapest fund on the market, it is quite close to both names.

It is the second such fund to launch in October 2020 and offers actively managed exposure to the asset class for 21 basis points. That gave Janus Henderson a lead, even as BlackRock Inc. launches a rival product.

JAAA is also the only CLO ETF that is considered to have an institutional use case, such as hedging, according to a Citigroup report released last week. But that dynamic could change in a category expected to triple in size.

“The CLO category is still in its infancy,” wrote Citi strategists, including Drew Pettit. “It is possible that several products will have an institutional use case, which is common in other credit ETF categories.”

For now, high interest rates have been a boon for JAAA, which nearly doubled in size in the first six months of the year after ending 2023 with about $5.3 billion in assets . The fund has gained about 9% on a total return basis over the past year, compared to about 2% for the iShares Core US Aggregate Bond ETF (AGG).

“We believe AAA CLOs are an attractive addition to portfolios due to their diversification benefits, low interest rate volatility, attractive yields and strong credit ratings,” said John Kerschner , head of US securitized products at Janus Henderson, in the press release.

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