Janus Looking Forward

USA

Janus Henderson lists Global Financial Crisis ETF

Janus Henderson is listing an actively managed mortgage-backed securities ETF, that has come to market on the 10th anniversary of the 2008 financial crisis. The Janus Henderson Mortgage-Backed Securities ETF (JMBS) and its fund managers will pick and choose between US mortgage-backed securities. It is the first actively managed mortgage-backed securities ETF to cover the $6.5 trillion US market.

The fund will pick MBSs across a range of maturities with a view to beating the Bloomberg Barclays US MBS Index Total Return Value Unhedged Index by 0.50%, the prospectus indicates. It can invest in either residential and commercial MBS as well as collateralised debt obligations and other mortgage-related vehicles that are issued by the US government and its mortgage agencies.

While the fund will mostly invest in investment grade securities it can also buy high yield (i.e. sub-prime) debts if the fund managers think its a good idea. The fund will also trust the ratings agencies to decide which are investment grade and which are not. The fund’s managers can also hedge their risk by investing in derivatives including credit default swaps.

Analysis – WHAT COULD POSSIBLY GO WRONG

Here we have an ETF that does everything the financial crisis taught us not to: buys sub-prime debt, trusts ratings agencies, then hedges with credit default swaps.

We hope that the world has learned enough to ensure that this product flies safely. But we’re also old enough and cynical enough to know that most people don’t learn from history. And are thus doomed to repeat it.

It’s difficult to look at this listing without wondering ‘what could possibly go wrong?’

Canada

Royal Bank of Canada lists laddered corporate bond ETF

Canada’s largest company RBC is listing a new laddered corporate bond ETF with a 2024 targeted maturity date. The RBC Target 2024 Corporate Bond Index ETF (RQL) will track the FTSE TMX Canada 2024 Maturity Corporate Bond Index, for which we could find no factsheet.

 

Laddered bond ETFs function like a single bond, returning principal with interest in the target year. But are structured like bond funds, made up of lots of different bonds. The advantage of laddered bond ETFs is that they allow retail investors to get their capital back on a specified month. And because they’re made of lots of different bonds there is less credit risk.

Brazil

Mirae Asset penetrates Brazil, listing first fixed income ETF

Mirae Asset, the Seoul-based ETF provider whose subsidiaries include Horizons, BetaShares, Tiger and Global X, it is extending its penetration of Latin America and listing its first ETF in Brazil. The Mirae Asset Renda Fixa Pre Fundp de Indice (FIXA11) will be the first fixed income ETF listed in Sao Paulo.

 

The fund will track the S&P/B3 Fixed Income Index, which is made up of a hypothetical portfolio of three-year DI futures contracts. Brazil’s capital market is a bit of a new place for us, but from what we understand DI futures are futures from interbank deposits. We believe the appeal of FIXA11 is that it allows investors to hedge against interest rate movements.

 

USA

iShares updates corporate term bond suite

BlackRock iShares is listing a laddered corporate bond ETF updated for the next 10 years. The iShares iBonds Dec 2028 Term Corporate ETF will track a hypothetical portfolio of investment grade corporate bonds all due to expire in 2028. The fund provides bullet maturity rather than perpetual exposure to a maturity pocket. (In much the same manner and same reasons as the RBC product discussed above). It is structured much the same as iShares other laddered corporate bond products expiring in 2027, 2026 etc.