Janus Henderson AAA CLO ETF

JAAA

Market cap $25.1B

The chances for a notable correction are certainly not low. Going into richly priced and growth-focused names might not be the smartest idea. Yet, sitting on sidelines might come with some serious opportunity costs.

Janus Henderson AAA CLO ETF offers a 5.5% yield and capital preservation through exposure to high-quality, AAA-rated CLO securities. JAAA is best suited for income-focused investors seeking stability, not those looking for capital appreciation or index-like returns. While JAAA's risk of defaults is historically low, distributions may trend downward if the Fed continues to cut interest rates.

Active ETFs issuance has been torrid since 2021. At the start of that year there were 535 active ETFs versus 1,959 passive ETFs.

When you retire, a significant shift in your investing strategy is necessary.

Janus Henderson's head of innovation Nick Cherney tells CNBC's Contessa Brewer the tokenization of ETFs is potentially the most transformative technology to hit financial services in decades and how the firm is getting ahead of the interest by launching products in the category. VanEck's product manager Nicholas Frasse joins the conversation.

Nick Cherney of Janus Henderson sits down with CNBC's Contessa Brewer on 'ETF Edge' to discuss the strategies investors can take to position their portfolios before the Fed decision this week and the interest in tokenization vs. taking the traditional ETF route.

Interest rates are very likely set to go down. This creates a fruitful ground for REIT bulls to become optimistic. Yet, there is an important caveat to this.

JAAA offers superior risk-adjusted returns vs. ICLO, thanks to greater diversification, higher liquidity, and a lower bid-ask spread. Despite ICLO's slightly higher yield and active management, its increased concentration and liquidity risks outweigh the marginal return advantage. Both funds invest in AAA CLOs with negligible credit risk, but JAAA's passive, diversified approach minimizes manager-specific and liquidity risks.

CLO ETFs have higher yields, lower risk and volatility, than most other types of fixed-income ETFs. Performance has been exceedingly strong for years, albeit a bit weaker since the Fed cut rates last year. There are CLO ETFs with different risk-return profiles, some appropriate for more risk-averse investors, some for more aggressive ones.

JAAA remains a strong buy for cash allocations due to its focus on AAA CLO tranches, offering safety and low volatility. The fund invests 99% in AAA CLOs, which have never defaulted in 30 years, making it a reliable vehicle for storing 'dry powder.' Recent discounts to NAV are viewed as temporary blips, not a fundamental concern for long-term investors.