If “bravery never goes out of style,” as William Makepeace Thackeray once wrote, then Janus Henderson might just be Europe’s most a la mode ETF issuer.
While the Janus Henderson Tabula Japan High Conviction Equity UCITS ETF (JCPN) is not Europe’s first concentrated active equity ETF, it is the most high-profile launch in the segment to-date and the first chapter of a wider Janus Henderson story.
Indeed, JCPN was swiftly followed by a European equivalent and the firm has since filed for a CLO ETF with two further active ETFs planned, according to the firm’s Q3 results.
The strategy is brave for a few reasons. First, early runners like ARK Invest’s thematic range have largely failed to attract significant inflows. While Janus Henderson’s strategies may have broader appeal, the firm’s due diligence could hardly have suggested it was on to a sure thing.
Indeed, without the inherent tax advantages enjoyed by ETFs in the US, some have even questioned what problems high-conviction active ETFs are actually solving.
Second, due to the transparency requirements that come with ETFs, Janus Henderson is essentially giving away intellectual property; something that, rightly or wrongly, discourages many active mutual fund managers from wanting to enter the space.
Third, the foray into active ETFs is not without significant financial risk.
To bring out its investment strategies in ETF form, the US asset manager acquired UK issuer Tabula Investment Management. While the deal terms were not disclosed, Tabula had $877m in assets under management (AUM) across 11 exchange-traded products (ETPs) at the time of purchase.
Fourth, and perhaps most important, if the active ETF endeavour fails and the firm is forced to abandon it, how damaging is that for its reputation? And how will its shareholders react?
If nothing else, Janus Henderson is putting its mouth where its money is, with head of innovation Nick Cherney predicting that Europe’s active ETF market will reach $1trn in assets by 2030 – about a 20-fold increase from current levels.
The bold call was “reinforced by feedback from clients on the ground,” added the firm.
Whether that proves prophetic or preposterous, the industry will be looking to JCPN as the bellwether.
