To stand out in the exchanged-traded fund world, a new entrant can compete on two fronts—costs and/or uniqueness.
Janus Capital Group is forging into the ETF market using proprietary research to help it stand out in a crowded field. Janus made its name in active management, particularly in the 1990s with star portfolio managers for its mutual funds.
“We’re not offering any product that is commoditized,” says Nick Cherney, head of ETFs at Janus. “We’re not offering another version of the same index that someone else is offering. Every one of our products we’ve done on a propriety basis or is unique in the market. And we’re offering something different and hopefully people find it to be better.”
The firm has 10 ETFs: four thematic funds, five so-called “enhanced” beta products, and an actively managed fixed-income fund.
Two Janus’ ETFs, the Janus Velocity Volatility Hedged Large Cap ETF (SPXH) and Janus Velocity Tail Risk Hedged Large Cap ETF (TRSK), were launched in 2013 by VelocityShares, a company Janus acquired in 2014. They both have an expense ratio of 0.71 percent. [The VelocityShares brand lives on in a suite of exhange-traded notes built for risk management. They are used mainly by hedge funds and institutions as hedging tools, according to a Janus spokesman, who adds that Janus maintains separate branding for the ETFs and ETNs to reflect their different user bases.]
Cherney says the other eight ETFs, all of which launched in 2016, are “very much rooted in the core expertise that Janus has.”
Two funds that started trading in February 2016—the Janus Small Cap Growth Alpha ETF (JSML) and Janus Small/Mid Cap Growth Alpha ETF (JSMD)—were built using the stock selection process for Janus Venture and Triton, two mutual funds that are closed to new investors.
It’s no secret that investors are moving out of mutual funds and into ETFs, but there’s a question of whether a mutual fund company may be cannibalizing its funds by offering ETFs. Cherney says that’s not the case for Janus.
“To the extent that clients would leave a similarly related mutual fund to go into an ETF, then presumably that’s because they were going to leave that fund anyway,” he says.
Based on assets under management, the Janus ETFs as a group have been slow to catch on. The largest, SPXH, has more than $44 million in assets. The company’s global dividend fund, Janus SG Global Quality Income ETF (SGQI), debuted in December and already has nearly $43 million in assets, while the Janus Short Duration Income ETF (VNLA), which debuted in November, has $35 million in assets.