Janus Henderson Investors has launched what it says is the first actively managed mortgage-backed securities (MBS) ETF designed to outperform the Bloomberg Barclays US MBS Index.
The introduction of the Janus Henderson Mortgage-Backed Securities ETF (JMBS) follows on the success of the Janus Henderson Short Duration Income ETF (VNLA), whose assets have climbed to USD580.5 million less than two years after launch, as of 10 September 2018.
JMBS is the first US product and first ETF to be introduced since Denver-based Janus Capital Group merged with London-based Henderson Group on 30 May 2017, to create Janus Henderson Investors.
Mortgage-related assets account for about USD9.3 trillion of the USD41 trillion US fixed-income market. Investments in the USD6.5 trillion agency MBS market are largely held by a small number of passive ETFs, which have experienced significant inflows for the five years through 30 June 2018, institutional portfolios benchmarked to the Bloomberg Barclays US Aggregate Bond Index and actively managed mutual funds.
“There is considerable white space between lower-cost passive ETFs and higher-cost actively managed mutual funds that an actively managed ETF like JMBS has the potential to fill,” says John Kerschner, head of US securitised products at Janus Henderson, who will co-manage JMBS with Nick Childs. “We believe this product meets an important investor need, balancing current income and total return in one of the largest fixed-income markets in the world.”
The portfolio managers will leverage the company’s deep research capabilities in securitised assets in an effort to pinpoint inefficiencies in the MBS market. Globally, Janus Henderson has 10 analysts covering securitised products.
“We are hyper-focussed on modelling borrower behaviour to appreciate why and when home owners refinance or move,” says Childs. “Our bottom-up approach – where we analyse the idiosyncrasies and key fundamentals of each security rather than relying on a top-down macro view – is critical to our ability to outperform the Bloomberg Barclays US MBS Index.”
Janus Henderson entered the actively managed fixed-income ETF market in November 2016 with the Janus Henderson Short Duration Income ETF, which seeks to provide a steady income stream across various market cycles while preserving capital by selecting fixed-income instruments that provide a return of two to three percentage points above three-month LIBOR.
“JMBS gives investors seeking liquidity and minimal credit risk a strong option to potentially generate better risk-adjusted returns than low-cost passive MBS ETFs or higher fee active MBS mutual funds,” says Nick Cherney, Head of Exchange Traded Products.