Since the start of 2022, Janus Henderson AAA CLO ETF (NYSEARCA:JAAA) has seen a remarkable increase in popularity within the fixed-income ETF realm, with its AUM skyrocketing to $10.25B.
Unique and Desirable Characteristics
JAAA's holdings consist of 369 CLO tranches, predominantly AAA-rated, with nearly half maturing within 3-5 years, resulting in a weighted average maturity of 3.99 years. The effective duration of 0.21 years minimizes interest rate risk.
Impressive Credit Ratings
The AAA CLOs in JAAA's portfolio have a flawless track record, never experiencing a default throughout 30 years, even during tumultuous times like the dot-com bubble, 9/11, the GFC, and COVID-19.
Understanding CLOs
CLOs, or Collateralized Loan Obligations, offer various tranches ranging from the safest AAA to the riskiest Equity tranche, with floating rates that reset periodically based on predetermined spreads to indexes like SOFR or LIBOR.
Low Duration, High Yield
JAAA's low duration of 0.21 years provides minimal interest rate risk, offering stability in a volatile market. With a 30-day SEC yield of 6.67%, exceeding the current SOFR rate by 136 bps, JAAA presents an enticing investment option.
Comparative Analysis
Comparing JAAA to other ETFs like HYBB and BIL showcases its superior yield and lower duration, making it a standout choice among fixed-income products.
Future Prospects
While JAAA remains an excellent investment currently, investors should monitor market conditions closely for potential pivot opportunities into longer-duration products when rate cuts become imminent.
Final Verdict
JAAA's high yield and low default risk position it as a top contender in the fixed-income ETF landscape, offering investors diversification and promising returns. With its secure investment structure, JAAA is undoubtedly a buy recommendation for those seeking stable yet lucrative investment options.