Daily ETF Watch: Janus Plans Me Too Fund

Janus looks like it’s planning an ETF that’s just like one VelocityShares is already marketing.

Managing Editor
Reviewed by: Olly Ludwig
Edited by: Olly Ludwig

Janus Capital, which agreed recently to acquire the ETN and ETF company VelocityShares, filed regulatory paperwork asking for permission to market index ETFs, including self-indexed strategies. It also detailed plans for a large-cap fund that would have a tail-risk overlay involving volatility securities.

If the fund Denver-based Janus is describing sounds familiar, it’s because it is. The “Initial Fund” Janus detailed in the new “exemptive relief” filing sounds like a me-too version of the VelocityShares Tail Risk Hedged Large Cap ETF (TRSK | F-53), a $32 million fund that is among VelocityShares’ more successful ETFs. VelocityShares has around $2.5 billion in assets, most of it in volatility-focused ETNs. Less than $120 million of those assets are in ETFs.

The filing marks the first tangible move the Janus ETF Trust has made since it announced its plan to acquire VelocityShares in October. Janus appears to be making the move to buy its way into the rapidly growing world of exchange-traded funds. The mutual fund firm requested permission from the Securities and Exchange Commission to market active ETF strategies back in 2010.

The Janus-VelocityShares transaction preceded by almost two months insurance company New York Life’s plan to acquire the ETF company IndexIQ. Both transactions focus on companies with reputations of creating some of the more sophisticated ETFs now on the market. Indeed, many fund industry sources stress that the market for more sophisticated ETF strategies isn’t yet fully developed.

A Me-Too ‘Janus’ Tail-Risk Fund

The proposed fund will consist of three separate S&P 500 ETFs plus a volatility strategy to hedge “tail risk” events that can involve severe losses.

The “tail risk” strategy consists of two underlying index ETFs that use futures contracts, swap agreements and other financial investments to gain leveraged or inverse positions on the S&P 500 VIX Short-Term Futures Index. The “VIX” refers to the Chicago Board Options Exchange, Incorporated (“CBOE”) Volatility Index.

The VIX is designed to measure the market’s expectation of 30-day volatility in the S&P 500. The Short-Term VIX Futures Index measures the movements of a combination of VIX futures contracts and is designed to track changes for the VIX one month in the future.

It’s not clear how the proposed Janus fund and VelocityShares’ existing TRSK would co-exist in the marketplace.

Total assets in more than 1,660 ETFs are now just shy of $2 trillion. Assets keep flowing into ETFs, fund launches continue apace, and markets have mostly been pushing upward into record territory almost six years after the subprime mortgage crisis cratered markets and brought the global economy to the brink of a full-scale meltdown.

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Olly Ludwig is the former managing editor of etf.com. Previously, he was a financial advisor at Morgan Stanley Smith Barney and an editor at Bloomberg News. Before that, Ludwig was a journalist at the Reuters News Agency in New York.