(JAAA) Janus Detroit Street Trust - Ratings and Ratios

The Janus Henderson AAA CLO ETF (JAAA) is designed to capitalize on the stability and yield of top-tier collateralized loan obligations (CLOs). The funds primary strategy is to invest at least 90% of its net assets in AAA-rated CLOs at the time of purchase. These securities are considered the most senior and safest tranche in a CLO structure, offering lower risk compared to lower-rated tranches. If a CLO is unrated, the adviser assesses its credit quality to ensure it aligns with AAA standards, maintaining the funds focus on high credit quality.

The remaining 10% of the funds assets may be allocated to other high-quality CLOs rated A or higher at the time of purchase. Similar to the AAA allocation, unrated securities in this category must meet the advisers criteria for comparable credit quality. This dual strategy allows the fund to balance stability with incremental yield, leveraging the resilience of AAA-rated CLOs while exploring opportunities in slightly lower-rated but still high-quality instruments.

CLOs themselves are structured finance products that pool together leveraged loans, typically to corporations. The income from these loans is distributed across different tranches of the CLO, with senior tranches like AAA bearing the least risk. This structure makes AAA-rated CLOs particularly attractive in environments where credit spreads are widening or default risks are rising, as they are insulated from the first layer of potential losses.

For investors and fund managers, JAAA offers exposure to a diversified portfolio of CLOs, which are historically less correlated with traditional fixed-income assets like corporate bonds or Treasury securities. This diversification can enhance the risk-adjusted returns of a fixed-income portfolio. Additionally, the funds focus on the highest-rated tranches aligns with a conservative investment approach, prioritizing capital preservation alongside income generation.