Biggest CLO ETF cements its dominance as it smashes $10B AUM barrier

The fund, which is neither the first mover nor the price leader, now has a roughly 90 percent share of the bourgeoning market.

The biggest ETF tracking collateralized loan obligations has reached $10 billion in assets, helping Janus Henderson further tighten its grip on the quickly growing niche.

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

The asset manager has dominated the arena for ETFs holding CLOs, which are bonds backed by leveraged loans that pay floating rates, meaning they generate more income as yields rise. While JAAA is neither the first mover nor the cheapest fund on the market, it’s pretty close to both titles.

It was the second such fund of its kind to launch in October 2020, and offers actively managed exposure to the asset class for 21 basis points. That’s handed Janus Henderson a lead, even with the likes of BlackRock Inc. launching a rival product.

JAAA is also the only CLO ETF that screens as having an institutional use case, such as hedging, according to a Citigroup report published last week. But that dynamic could change in a category that’s estimated to triple in size.

“The CLO category is still in its early innings,” Citi strategists including Drew Pettit wrote. “There is a possibility that more than one product can have an institutional use case, which is common in other credit ETF categories.”

For now, elevated interest rates have been a boon for JAAA, which has 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 roughly 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 returns and strong credit ratings,” John Kerschner, head of US securitized products at Janus Henderson, said in the release.