Active MBS ETF Launches

September 13, 2018

Mortgage-backed securities sparked the last financial crisis, but that doesn’t mean investors are opposed to them as an asset class. Today Janus Henderson has expanded the opportunity set of investment choices by launching the only actively managed MBS ETF, the Janus Henderson Mortgage-Backed Securities ETF (JMBS).

The new fund comes with an expense ratio of 0.35% and lists on the NYSE Arca.

JMBS invests primarily in a wide range of mortgage-backed fixed income instruments covering different maturities, including everything from residential and commercial MBS to other ETFs that invest in MBS.

The securities that the fund offers exposure to can include government- or agency-issued debt or privately issued debt. While the portfolio will mostly include investment-grade debt, the fund managers have the discretion to invest in lower-rated securities the prospectus says.

The fund’s managers will use a bottom-up approach to select securities for the fund, with the goal of achieving a return that outperforms the Bloomberg Barclays US MBS Index Total Return Value Unhedged USD by 0.50% net of fees. To do this, the document notes that the managers can use derivatives as well as shorting strategies and can engage in securities lending.

There are currently five passively managed MBS ETFs trading on U.S. markets. The largest is the iShares MBS ETF (MBB), which launched in March 2007 and has $12 billion in assets under management. At 35 basis points, actively managed JMBS costs more than any of the existing MBS ETFs. MBB, for example, charges 0.09%.

Contact Heather Bell at [email protected]

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