Global economic and geopolitical uncertainty along with low yields in many countries of the developed world have caused fearful investors to hold an excessive amount of unproductive cash in their portfolios. ETFdb.com, in partnership with Janus Capital Group, put together a webinar that discusses a better solution to holding cash. The webinar is hosted by ETFdb.com’s Neelarjo Rakshit, a subject matter expert, and is presented by Dan Siluk, portfolio manager at Janus, and Alex Roitz, senior product specialist.
In the first part of the webinar, Dan takes you through the global economic outlook and secular macroeconomic trends. In the second and third parts, Dan discusses the solution to navigate this risky, low yield environment and how to get a decent return. In one word (or more), the solution is Janus Short Duration Income ETF (VNLA).
Why Absolute Return Fixed Income?
The available passive benchmarks currently do not provide an adequate risk-reward profile simply because most of them are forced to hold unproductive but risky assets such as European and Japanese debt. The Absolute Return Fixed Income aims to fix this oddity by actively choosing areas of the global economy that provide better yields at lower risk such as the U.S., Australia and New Zealand. Absolute Return managers have the flexibility to pick the best available global opportunities from a risk-reward standpoint and avoid exposure to unattractive regions – for instance, Europe and Japan, where interest rates are at rock bottom. By its own definition, a passive benchmark does not have this luxury.
In managing funds, Absolute Return managers have a four-pillar mindset. Capital preservation is, above all else, followed by the drawing of a bond allocation strategy. The risk is managed on a daily basis and managers consider various aspects, including maturity, geopolitical risks and liquidity. The fourth pillar consists of designing various hedging strategies through derivatives.
Read How Smart Beta Works For Fixed Income ETFs and target specific portfolio outcomes such as reduced risk and higher income at a lower cost than actively managed fixed-income ETFs.
Janus Short Duration Income ETF (VNLA)
As its name suggests, Janus Short Duration Income ETF (VNLA) has a short duration range of up to two years, which may change depending on the macroeconomic environment. With uncertainty stemming from the Donald Trump presidency and rising rates, Janus has reduced duration compared to the period before the presidential election.
Janus is targeting an annual return of between 2% and 3% and volatility of up to 1.5%. However, average volatility over the past ten years was significantly below the target at around 0.9%. Although the ETF has been recently launched, it is managed by a team that has a decade of experience working together on such strategies. Janus is hedging the currency risk in full, meaning the team can invest in any global asset it believes is attractive without exposing the portfolio to currency fluctuations.
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Janus’ investment approach is based on two components. First, the ETF will seek exposure to short-term fixed-income assets and will only invest in jurisdictions with a strong regulatory framework and transparent accounting principles. Second, Janus uses a range of structural alpha investments to generate additional returns. Interest rates, spread trades between countries and industries, as well as arbitrage opportunities are among other instruments employed to achieve this goal. For a full list of Janus Capital ETFs, click here.
The Bottom Line
The webinar presented by ETFdb.com in partnership with Janus Capital Group provides a solution for investors to replace cash holdings in their portfolios with a more profitable alternative. Janus Short Duration Income ETF (VNLA) aims to yield between 2% and 3% annually plus cash with extremely low volatility. In doing so, Janus will look for opportunities across the globe and invest only in situations it believes have a good risk-reward profile.