Janus Henderson’s opportunity to disrupt active fixed income ETFs

An underserved part of European ETFs

Tom Eckett

Bonds stopwatch

Janus Henderson’s entry into European ETFs is an exciting development for fund selectors seeking further product development in active fixed income, an area of the market ripe for disruption.

Last week, Janus Henderson announced plans to acquire Tabula Investment Management, a fixed income specialist that launched its first UCITS ETFs in 2018.

The acquisition, which is expected to be completed at the end of Q2, will see the US giant launch a suite of active ETFs while retaining Tabula’s existing 11-strong range of ETFs which totals $883m assets under management (AUM).

Janus Henderson already has an existing range of 11 US-listed ETFs with $16.7bn AUM which primarily focus on actively managed fixed income. For example, the largest, the Janus Henderson AAA CLO ETF (JAAA), houses $9bn AUM, as at 7 May.

“Janus Henderson is already one of the biggest fixed income ETF issuers in the US and acquiring Tabula with its fixed income focus will allow it to seamlessly expand into the European markets and beyond,” Dan Caps, investment manager at Evelyn Partners, told ETF Stream.

Janus Henderson’s acquisition appears to be well-timed. Fixed income UCITS ETFs saw a record $70bn inflows in 2023, according to data from ETFbook, outpacing the previous figure set in 2019, as investors piled into bonds to capture attractive yields.

Despite the record inflows, fund selectors still bemoan the lack of fixed income ETFs. According to ETF Stream’s recent survey of its ETF Buyers Club, 36% of respondents highlighted a “limited range of products” as the biggest challenge when investing in fixed income ETFs.

This is especially true in the active fixed income ETF space where product development has stagnated in recent years. The lack of focus from active ETF issuers on fixed income seems strange given the natural inefficiencies – such as central bank ownership and index construction limitations – that can be taken advantage of in the asset class.

Highlighting this, the latest SPIVA Europe scorecard from S&P Down Jones Indices (SPDJI) found more mixed results in fixed income versus equities where active managers consistently underperformed.

In sterling-denominated corporate bond funds, for example, just 24% of active managers underperformed over the past year while 47.% underperformed in the sterling government bond space.

“In the fixed income markets, the traditional sources of excess return often favoured or exploited by active managers include taking on higher duration (that is, longer-dated bonds), taking on more credit risk and seeking to earn additional returns from taking positions in less liquid securities,” Tim Edwards, managing director, index investment strategy at SPDJI, said.

Final word

It has traditionally been a challenge for new players to disrupt the incumbents, however, active fixed income is one area that is up for grabs. Janus Henderson could be well-positioned.

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