Janus Henderson's CLO ETF Surpasses $30 Billion, Signaling Growing Popularity

The largest collateralized loan obligation (CLO) exchange-traded fund (ETF), Janus Henderson's JAAA, has reached a milestone of $30 billion in assets under management (AUM). This growth indicates the increasing popularity of CLO strategies in the ETF industry. In June, Pacer ETFs and Barings launched two funds focusing on CLOs and secured credit, while Fidelity introduced two active strategies earlier this year. According to Greg Stumm, CEO of American Beacon Partners, the growth of the CLO market and the ETF's tradeability are enabling active strategies in the CLO space.

Investors are attracted to CLOs due to their downside protection and excess yield compared to corporate bonds. Data from ETF Trends shows that investment-grade CLO ETFs have 30-day yields in the 5%-6% range. Although CLOs have been around for a while, they became available as an ETF for individual investors only in 2020, with Janus Henderson's fund being one of the first launched.

John Kerschner, global head of securitized products at Janus Henderson, attributes some of the recent demand to the Federal Reserve's decision to hold interest rates steady. Despite CLO outflows in December due to rate cuts, investors have been allocating funds to these floating-rate products because they offer almost no duration. Kerschner also notes that inflation could make CLO funds valuable, as ongoing conflicts and supply chain issues are expected to increase inflation.