Janus Henderson B-BBB CLO ETF

JBBB

Market cap $1.24B

JBBB, a robust exchange-traded fund, currently faces significant headwinds from lower rates and tight spreads. Investors should focus on undervalued assets and avoid those with multiple negative factors, as is the case with JBBB. JBBB has underperformed in 2025, barely producing the total return of a portfolio of treasuries.

The Janus Henderson B-BBB CLO ETF has been one of my top income ETFs for several years. It has outperformed since inception, and its dividends have proven surprisingly stable in the face of Fed cuts. Performance much less so, with the fund underperforming most bonds and closer CLO peers YTD.

Rose's Income Garden (RIG) portfolio features 81 investments, with 11 monthly payers across BDCs, ETFs, and CEFs focused on income generation. CSWC and PFLT are highlighted BDCs, offering high yields; CSWC is a strong buy on dips, while PFLT is a speculative buy, despite recent pressure. RIG includes three crypto-related ETFs (BITO, ETHU, SSK), providing exposure to digital assets with variable payouts, and two bond-focused ETFs (JBBB, SHYG) as cash alternatives.

JBBB yields over 7%, for an exposure to CLO tranches from BBB+ to B- (floating rate) increasingly appreciated. A competitive segment compared to traditional aggregate income markets, an excellent asset allocation choice over the past 3 years. Despite the short duration, it is not unaffected by movements in the credit market. The upcoming changes could reduce the expected yield.

The investment case for closed-end funds (CEFs) is weak now due to tight discounts, high leverage costs, and expensive underlying assets. Most CEFs do not deliver sustainable alpha, and lower-fee actively managed ETFs now offer similar exposures with better economics. We have reduced our CEF allocation, favoring alternatives like BDCs, select ETFs, preferreds, and bonds for better value and risk/reward.

Janus Henderson B-BBB CLO ETF's yield remains above 7%, and the vehicle now trades at a discount to NAV. Benchmark rates will most likely shift in tandem with PCE, sustaining JBBB ETF's real yield. Credit risk is a tangible concern. Structurally higher risk could enhance JBBB ETF's loan-level spreads. However, a tail-risk event would introduce telling downside risk.

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.

Janus Henderson B-BBB CLO ETF offers an 8.04% yield, low correlation to traditional assets, and credit enhancements, making it a strong diversifier for income-focused portfolios. CLO ETFs, including JBBB, have seen rapid growth and outperform high-yield bonds and leveraged loans, with lower historical default rates. Key risks include limited liquidity, potential yield compression, and sensitivity to interest rates, making a buy-and-hold strategy advisable.

High-yielding CLOs are complex and dangerous, with the risks of NAV decay and yield reductions being very high. However, JBBB presents a completely different story. In the article, I discuss why I see a bullish case for JBBB, where, in my view, the typical high-yielding CLO risks are greatly mitigated.

My cautious stance on Janus Henderson B-BBB CLO ETF proved correct, as Trump's tariff escalation triggered sharp credit market declines, validating my preference for safer JAAA exposure. However, credit markets recovered following Trump's 90-day tariff pause, with JBBB's total returns now surpassing JAAA since March. With investors looking past Trump's escalations due to a perceived 'TACO trade' and resilient economic data, the risk of a recession is receding.