Anglo-Saxon asset manager Janus Henderson, which usually favors Ireland, has opted for Luxembourg for its CLO AAA UCITS ETF. The strong development of active ETFs in Europe is opening new perspectives for the financial center, where the subscription tax has just been abolished for these products.
The Anglo-American asset manager Janus Henderson, which usually prioritizes Ireland, has chosen Luxembourg for a flagship product in its range: the Janus Henderson Tabula European AAA CLO UCITS ETF. This is the European version of a successful American fund created in 2020, whose assets under management have just surpassed the $20 billion threshold.
Not to be confused with CDOs (Collateralized Debt Obligations), which suffered massive losses during the subprime crisis, a CLO (Collateralized Loan Obligation) is a bond backed by a portfolio of corporate bank loans. It is structured into risk tranches ranging from AAA (the safest) to equity (the riskiest).
This is a symbolic yet significant victory in the battle between financial centers for the domiciliation of active ETFs.
“National regulators have interpreted ESMA (European Securities and Markets Authority) guidelines differently, although discrepancies are tending to narrow.”
Potential Excess Return
Unlike passive ETFs, which replicate the performance of an index (such as the S&P 500 or Euro Stoxx 50), active ETFs rely on the intervention of managers and regular portfolio adjustments to generate a potential excess return.
Why Luxembourg? “Over the past five years, regulations on CLO investments within UCITS funds have evolved. National regulators have interpreted ESMA (European Securities and Markets Authority) guidelines differently, although discrepancies are tending to narrow,” responds Janus Henderson.
Behind this decision also lies the abolition of the subscription tax that these products were subject to until last year in the Grand Duchy, although the asset manager denies any direct link: “The fact that Luxembourg has removed this tax is an advantage, but it is merely a coincidence in terms of timing.”
What’s Next?
Janus Henderson is expected to continue evaluating the advantages of both locations, thereby maintaining competition: “Janus Henderson has structures in both jurisdictions and will make decisions on a case-by-case basis, considering several factors, including regulatory guidance and economic differences related to the management of collective investment funds.”
“Active UCITS ETFs in Europe represent approximately $50 billion in assets under management, about 2% of the total ETF market.”
Growing Twice as Fast
The financial stakes are high, as the active ETF segment is very promising. “Active UCITS ETFs in Europe represent approximately $50 billion in assets under management, about 2% of the total ETF market. However, this asset class is growing nearly twice as fast as passive ETFs,” observes Stefan Garcia, Chief Commercial Officer (CCO) at Janus Henderson.
“Investors appreciate their advantages: transparency and liquidity thanks to the structure of these funds, clear and competitive fees, flexibility with the possibility of trading on the stock exchange or over-the-counter, and better portfolio visibility with daily position disclosures,” he explains.
The ‘Professional Investor DNA Survey’ published a few days ago by Fidelity International, conducted in partnership with consulting firm Crisil Coalition Greenwich, confirms this enthusiasm.
Strengthening Allocations
Conducted among more than 120 institutional investors in Europe and Asia, the survey reveals that nearly a quarter (24%) of professional investors already use active ETFs.
According to Fidelity, demand for these funds is expected to grow faster than for any other type of investment vehicle over the next 18 months: “37% of surveyed investors plan to increase their allocation. Medium-sized investors are the most interested, with 61% planning to increase their weighting in portfolios.”
At the end of 2024, Fidelity claimed the position of the second-largest provider of active ETFs in Europe, with $6 billion in assets under management and $2.2 billion in new net inflows over one year.
