February 28,
2022
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Ticker |
Janus
Henderson AAA CLO ETF |
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JAAA |
Principal
U.S. Listing Exchange: NYSE Arca, Inc. |
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Janus Detroit Street Trust
Prospectus
The
Securities and Exchange Commission has not approved or disapproved of these
securities or passed on the accuracy or adequacy of this Prospectus. Any
representation to the contrary is a criminal offense.
This
Prospectus describes Janus Henderson AAA CLO ETF (the “Fund”), a portfolio of
Janus Detroit Street Trust (the “Trust”). Janus Henderson Investors US LLC
(formerly Janus Capital Management LLC)
(the “Adviser”) serves as investment adviser to the Fund.
Shares
of the Fund are not individually redeemable and the owners of Fund shares may
purchase or redeem shares from the Fund in Creation Units only, in accordance
with the terms set forth in this Prospectus. The purchase and sale price of
individual Fund shares trading on an exchange may be below, at or above the most
recently calculated net asset value for Fund shares.
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1
½Janus Detroit Street Trust
FUND
SUMMARY
Janus
Henderson AAA CLO ETF
Ticker: JAAA
Janus Henderson AAA CLO ETF seeks capital
preservation and current income by seeking to deliver floating-rate exposure to
high quality AAA‑rated collateralized loan obligations (“CLOs”).
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FEES AND EXPENSES OF THE FUND |
This
table describes the fees and expenses that you may pay if you buy, hold and sell
shares of the Fund. Investors may pay brokerage commissions and other fees to
financial intermediaries on their purchases and sales of Fund shares, which are
not reflected in the table or in the example below.
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ANNUAL
FUND OPERATING EXPENSES (expenses that you pay each year as a
percentage of the value of your investment) |
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Management
Fees |
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0.25% |
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Other
Expenses(1)
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0.00% |
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Acquired
Fund Fees and Expenses(2) |
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0.01% |
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Total
Annual Fund Operating Expenses |
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0.26% |
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(1) |
Other
Expenses are based on the estimated expenses that the Fund expects to
incur. |
(2) |
Acquired Fund
Fees and Expenses are indirect fees and expenses that the Fund incurs from
investing in other investment companies. Please note that the amount of
Total Annual Fund Operating Expenses shown in the above table may differ
from the ratio of gross expenses included in the “Financial Highlights”
section of this prospectus, which reflects the operating expenses of the
Fund and does not include indirect expenses such as Acquired Fund Fees and
Expenses. |
EXAMPLE:
The Example is intended
to help you compare the cost of investing in the Fund with the cost of investing
in other funds. The Example assumes that you invest
$10,000 in the Fund for the time periods indicated and then sell all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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$ |
27 |
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$ |
84 |
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$ |
146 |
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$ |
331 |
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Portfolio
Turnover: The Fund pays transaction
costs, such as commissions, when it buys and sells securities (or “turns over”
its portfolio). A higher portfolio turnover rate may indicate higher transaction
costs and may result in higher taxes when Fund shares are held in a taxable
account. These costs, which are not reflected in annual fund operating expenses
or in the Example, affect the Fund’s performance. During the most recent fiscal
year, the Fund’s portfolio turnover rate was 42% of the average value of its
portfolio.
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PRINCIPAL INVESTMENT STRATEGY |
The
Fund pursues its investment objective by investing, under normal circumstances,
at least 90% of its net assets (plus any borrowings made for investment
purposes) in CLOs of any maturity that are rated AAA (or equivalent by a
nationally recognized statistical rating organization (“NRSRO”)) at the time of
purchase, or if unrated, determined to be of comparable credit quality by the
Adviser. For purposes of the Fund’s investment policies, CLOs are floating- or
fixed-rate debt securities issued in different tranches, with varying degrees of
risk, by a trust or other special purpose vehicle and backed by an underlying
portfolio consisting primarily of below investment grade corporate loans. Such
loans may include domestic and foreign senior secured loans, senior unsecured
loans and subordinate corporate loans, which may individually be rated below
investment grade or the equivalent if unrated. The underlying loans are selected
by a CLO’s manager. Under normal market conditions, the Fund
will
1½Janus Henderson AAA CLO ETF
seek
to maintain a minimum of 80% of its portfolio in AAA‑rated CLOs. After purchase,
a CLO may have its rating reduced below the minimum rating required by the Fund
for purchase. In such cases, the Fund will consider whether to continue to hold
the CLO. The Fund may temporarily deviate from the 80% policy while deploying
new capital as the result of cash creation or redemption activity, or during
unusual market conditions, or highly unusual market conditions such as a
downgrade in the rating of one or more CLOs.
The
Fund may invest its remaining assets in other high-quality CLOs with a minimum
rating of A‑ at the time of purchase or if unrated, determined to be of
comparable credit quality by the Adviser. No CLO, at the time of purchase by the
Fund, will have a rating that is below A‑ (or equivalent by an NRSRO). An NRSRO
is a credit rating agency that is registered with the Securities and Exchange
Commission (“SEC”) that issues credit ratings that the SEC permits other
financial firms to use for certain regulatory
purposes.
The
Fund will only invest in CLOs with a minimum initial total offering size of
$250 million and minimum initial senior AAA tranche size of
$100 million.
The
Fund will invest primarily in CLOs that are U.S. dollar denominated. However,
the Fund may from time to time invest up to 30% of its net assets in CLOs that
are denominated in foreign currencies. To the extent the Fund invests in
non‑U.S. dollar denominated securities, it will seek to hedge its exposure to
foreign currency to U.S. dollars, as described more fully
below.
The
Fund may purchase CLOs both in the primary and secondary
markets.
The
Fund will not invest more than 5% of its portfolio in any single CLO, and will
not invest more than 15% of its portfolio in CLOs managed by a single CLO
manager.
The
Fund will limit its investment in fixed-rate CLOs to a maximum of 10% of its net
assets.
The
Fund may invest in derivatives only to hedge or offset risks associated with the
Fund’s existing portfolio of CLOs. Derivatives are instruments that have a value
derived from, or directly linked to, an underlying asset, such as fixed-income
securities, interest rates, currencies, or market indices. The Fund’s use of
derivatives will be limited to (i) currency forward contracts or futures
contracts to hedge any foreign currency exposure back to the U.S. dollar, and
(ii) interest rate swaps or interest rate futures to hedge exposure in
fixed-rate CLOs to a floating-rate, in accordance with the Fund’s investment
objective. Accordingly, the Fund’s use of derivatives associated with currency
hedging will be limited by its maximum exposure of up to 30% of its net assets
in CLOs that are denominated in foreign currencies. Derivatives will not be used
for any other purposes.
The
Fund may invest a portion of its assets in cash or other short-term instruments,
such as money market instruments or money market funds, while deploying new
capital, for liquidity management purposes, managing redemptions, or for
defensive purposes, including navigating unusual market
conditions.
The
Fund is “actively-managed” and does not seek to replicate the composition or
performance of any particular index. Accordingly, the portfolio managers have
discretion on a daily basis to manage the Fund’s portfolio in accordance with
the Fund’s investment objective. The portfolio managers apply a “bottom up”
approach to selecting investments to purchase and sell. This means that the
portfolio managers look at securities one at a time to determine if a security
is an attractive investment opportunity and if it is consistent with the Fund’s
investment policies.
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PRINCIPAL INVESTMENT RISKS |
Although the Fund may be less volatile than funds that
invest most of their assets in common stocks, the Fund’s returns and yields will
vary, and you could lose money. The principal risks and special
considerations associated with investing in the Fund are set forth below.
CLO
Risk. The risks of investing in CLOs include both the
economic risks of the underlying loans combined with the risks associated with
the CLO structure governing the priority of payments. The degree of such risk
will generally correspond to the specific tranche in which the Fund is invested.
The Fund intends to invest primarily in AAA‑rated tranches; however, this rating
does not constitute a guarantee, may be downgraded, and in stressed market
environments it is possible that even senior CLO tranches could experience
losses due to actual defaults, increased sensitivity to defaults due to
collateral default and the disappearance of the subordinated/equity tranches,
market anticipation of defaults, as well as negative market sentiment with
respect to CLO securities as an asset class. The Fund’s portfolio managers may
not be able to accurately predict how specific
2½Janus Henderson AAA CLO ETF
CLOs
or the portfolio of underlying loans for such CLOs will react to changes or
stresses in the market, including changes in interest rates. The most common
risks associated with investing in CLOs are liquidity risk, interest rate risk,
credit risk, call risk, and the risk of default of the underlying asset, among
others.
Debt Securities
Risk. Variable‑and floating-rate debt obligations
(including CLOs and the portfolio of loans underlying the CLOs), as well as
fixed-income debt instruments are subject to the following
risks.
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Liquidity Risk. Liquidity
risk refers to the possibility that the Fund may not be able to sell or
buy a security or close out an investment contract at a favorable price or
time. Consequently, the Fund may have to accept a lower price to sell a
security, sell other securities to raise cash, or give up an investment
opportunity, any of which could have a negative effect on the Fund’s
performance. Infrequent trading of securities also may lead to an increase
in their price volatility. CLOs, and their underlying loan obligations,
are typically not registered for sale to the public and therefore are
subject to certain restrictions on transfer and sale, potentially making
them less liquid than other types of securities. Additionally, when the
Fund purchases a newly issued CLO directly from the issuer (rather than
from the secondary market), there often may be a delayed settlement
period, during which time the liquidity of the CLO may be further reduced.
During periods of limited liquidity and higher price volatility, the
Fund’s ability to acquire or dispose of CLOs at a price and time the Fund
deems advantageous may be impaired. CLOs are generally considered to be
long-term investments and there is no guarantee that an active secondary
market will exist or be maintained for any given
CLO. |
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Interest Rate Risk. As
interest rates decrease, issuers of the underlying loan obligations may
refinance any floating rate loans, which will result in a reduction in the
principal value of the CLO’s portfolio and require the CLO to reinvest
cash at an inopportune time. Conversely, as interest rates rise, borrowers
with floating rate loans may experience difficulty in making payments,
resulting in delinquencies and defaults, which will result in a reduction
in cash flow to the CLO and the CLO investors, including the Fund. An
increase in interest rates may cause the value of fixed-income securities
held by the Fund to decline. The Fund may be subject to a greater risk of
rising interest rates due to the current period of historically low rates
and the effect of potential government fiscal and monetary policy
initiatives and resulting market reaction to those
initiatives. |
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Floating Rate Obligations
Risk. Securities with floating or variable interest rates can
be less sensitive to interest rate changes than securities with fixed
interest rates, but may decline in value if their interest rates do not
rise as much, or as quickly, as interest rates in general. Conversely,
floating rate securities will not generally increase in value if interest
rates decline. A decline in interest rates may result in a reduction of
income received from floating rate securities held by the Fund and may
adversely affect the value of the Fund’s shares. Generally, floating rate
securities carry lower yields than fixed notes of the same maturity. The
interest rate for a floating rate note resets or adjusts periodically by
reference to a benchmark interest rate. The impact of interest rate
changes on floating rate investments is typically mitigated by the
periodic interest rate reset of the investments. Securities with longer
durations tend to be more sensitive to interest rate changes, usually
making them more volatile than securities with shorter durations.
Benchmark interest rates, such as the London Interbank Offered Rate
(“LIBOR”), may not accurately track market interest
rates. |
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Credit Risk. Debt issuers
and other counterparties may not honor their obligations or may have their
debt downgraded by ratings agencies. Ratings provided by NRSROs represent
their opinions of the claims-paying ability of the entities rated by them.
Such ratings are general and are not absolute standards of quality. For
CLOs, the primary source of credit risk is the ability of the underlying
portfolio of loans to generate sufficient cash flow to pay investors on a
full and timely basis when principal and/or interest payments are due.
Default in payment on the underlying loans will result in less cash flow
from the underlying portfolio and, in turn, less funds available to pay
investors in the CLO. |
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Call Risk. During periods
of falling interest rates, an issuer of a callable bond held by the Fund
may “call” or repay the security before its stated maturity. CLOs are
typically structured such that, after a specified period of time, the
majority investor in the equity tranche can call (i.e., redeem) the
securities issued by the CLO in full. The Fund may not be able to
accurately predict when or which of its CLO investments may be called,
resulting in the Fund having to reinvest the proceeds in unfavorable
circumstances, which in turn could cause in a decline in the Fund’s
income. |
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Extension Risk. During
periods of rising interest rates, certain debt obligations potentially
including the portfolio of loans underlying a CLO will be paid off
substantially more slowly than originally anticipated and the value of
those securities may fall sharply, resulting in a decline in the Fund’s
income and potentially in the value of the Fund’s
investments. |
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Income Risk. The Fund’s
income may decline if interest rates fall. This decline in income can
occur because most of the CLO debt instruments held by the Fund will have
floating or variable interest
rates. |
3½Janus Henderson AAA CLO ETF
• |
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Valuation Risk. Valuation
Risk is the risk that one or more of the debt securities in which the Fund
invests are priced differently than the value realized upon such
security’s sale. In times of market instability, valuation may be more
difficult. The tiered structure of certain CLOs may subject them to price
volatility and enhanced liquidity and valuation risk in times of market
stress. |
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Privately Issued Securities
Risk. CLOs are generally privately-issued securities, and are
normally purchased pursuant to Rule 144A or Regulation S under the
Securities Act of 1933, as amended (the “Securities Act”).
Privately-issued securities typically may be resold only to qualified
institutional buyers, in a privately negotiated transaction, to a limited
number of purchasers, or in limited quantities after they have been held
for a specified period of time and other conditions are met for an
exemption from registration. Because there may be relatively few potential
purchasers for such securities, especially under adverse market or
economic conditions or in the event of adverse changes in the financial
condition of the issuer, the Fund may find it more difficult to sell such
securities when it may be advisable to do so or it may be able to sell
such securities only at prices lower than if such securities were more
widely held and traded. At times, it also may be more difficult to
determine the fair value of such securities for purposes of computing the
Fund’s net asset value per share (“NAV”) due to the absence of an active
trading market. There can be no assurance that a privately-issued security
previously deemed to be liquid when purchased will continue to be liquid
for as long as it is held by the Fund, and its value may decline as a
result. |
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Covenant Lite Loans Risk.
Certain of the underlying loans in which a CLO may invest may be issued or
offered as “covenant lite” loans, which have few or no financial
maintenance covenants that would require a borrower to maintain certain
financial metrics. A CLO may be delayed in enforcing its interests in
covenant lite loans, which may result in
losses. |
CLO Manager
Risk. CLOs are managed by investment advisers
independent of the Adviser. CLO managers are responsible for selecting, managing
and replacing the underlying bank loans within a CLO. CLO managers may have
limited operating histories, may be subject to conflicts of interests, including
managing the assets of other clients or other investment vehicles, or receiving
fees that incentivize maximizing the yield, and indirectly the risk, of a CLO.
Adverse developments with respect to a CLO manager, such as personnel and
resource constraints, regulatory issues or other developments that may impact
the ability and/or performance of the CLO manager, may adversely impact the
performance of the CLO securities in which the Fund
invests.
LIBOR Replacement
Risk. The Fund may invest in certain debt securities,
derivatives, or other financial instruments that utilize the London Inter-Bank
Offered Rate (“LIBOR”) as a reference rate for various rate calculations. The
U.K. Financial Conduct Authority has announced that it intends to stop
compelling or inducing banks to submit rates for many LIBOR settings after
December 31, 2021, and for certain other commonly-used U.S. dollar LIBOR
settings after June 30, 2023. The elimination of LIBOR or other reference
rates and the transition process away from LIBOR could adversely impact
(i) volatility and liquidity in markets that are tied to those reference
rates, (ii) the market for, or value of, specific securities or payments
linked to those reference rates, (iii) the availability or terms of
borrowing or refinancing, or (iv) the effectiveness of hedging strategies.
For these and other reasons, the elimination of LIBOR or other reference rates
may adversely affect the Fund’s performance and/or net asset value. Alternatives
to LIBOR are established or in development in most major currencies including
the Secured Overnight Financing Rate (“SOFR”) that is intended to replace the
U.S. dollar LIBOR.
The
effect of the discontinuation of LIBOR or other reference rates on the Fund will
vary depending on, among other things (i) existing fallback or termination
provisions in individual contracts and (ii) whether, how, and when industry
participants develop and adopt new reference rates and fallbacks for both legacy
and new products and instruments. Accordingly, it is difficult to predict the
full impact of the transition away from LIBOR or other reference rates on the
Fund until new reference rates and fallbacks for both legacy and new products,
instruments and contracts are commercially
accepted.
Foreign Exposure
Risk. The Fund may have exposure
to foreign markets as a result of its investments in foreign securities and
securities denominated in foreign currencies. As a result, its returns and net
asset value may be affected to a large degree by fluctuations in currency
exchange rates or political or economic conditions in a particular country. In
some foreign markets, there may not be protection against failure by other
parties to complete transactions. It may not be possible for the Fund to
repatriate capital, dividends, interest, and other income from a particular
country or governmental entity. In addition, a market swing in one or more
countries or regions where the Fund has invested a significant amount of its
assets may have a greater effect on the Fund’s performance than it would in a
more geographically diversified portfolio. To the extent the Fund invests in
foreign debt securities, such investments are sensitive to changes in interest
rates. The Fund’s investments may be denominated in foreign currencies and
therefore, changes in the value of a country’s currency compared to the U.S.
dollar may affect the value of the Fund’s
investments.
4½Janus Henderson AAA CLO ETF
Currency
Risk. As long as the Fund holds a
foreign security, its value will be affected by the value of the local currency
relative to the U.S. dollar. When the Fund sells a foreign currency denominated
security, its value may be worth less in U.S. dollars even if the security
increases in value in its home country. U.S. dollar-denominated securities of
foreign issuers may also be affected by currency risk, as the value of these
securities may also be affected by changes in the issuer’s local currency.
Although the Fund will seek to hedge any exposure to foreign currency back to US
dollars, there is no guarantee such hedging strategies will be effective or have
the desired result.
Geographic Investment
Risk. To the extent that the Fund invests a significant
portion of its assets in a particular country or geographic region, the Fund
will generally have more exposure to certain risks due to possible political,
economic, social, or regulatory events in that country or region. Adverse
developments in certain regions could also adversely affect securities of other
countries whose economies appear to be unrelated and could have a negative
impact on the Fund’s performance.
Investment Focus
Risk. Because the Fund invests primarily in CLOs it is
susceptible to an increased risk of loss due to adverse occurrences in the CLO
market, generally, and in the various markets impacting the portfolios of loans
underling these CLOs. The Fund’s CLO investment focus may cause the Fund to
perform differently than the overall financial market and the Fund’s performance
may be more volatile than if the Fund’s investments were more diversified across
financial instruments and or
markets.
Newly Issued
Securities Risk. The credit obligations in which the
Fund invests may include newly issued securities, or “new issues,” such as
initial debt offerings. New issues may have a magnified impact on the
performance of the Fund during periods in which it has a small asset base. The
impact of new issues on the Fund’s performance likely will decrease as the
Fund’s asset size increases, which could reduce the Fund’s returns. New issues
may not be consistently available to the Fund for investing, particularly as the
Fund’s asset base grows. Certain new issues, such as initial debt offerings, may
be volatile in price due to the absence of a prior trading market, limited
quantities available for trading and limited information about the issuer. The
Fund may hold new issues for a short period of time. This may increase the
Fund’s portfolio turnover and may lead to increased expenses for the Fund, such
as transaction costs. In addition, new issues can experience an immediate drop
in value after issuance if the demand for the securities does not continue to
support the offering price.
Extended Settlement
Risk. Newly issued CLOs purchased in the primary market
typically experience delayed or extended settlement periods. In the period
following such a purchase and prior to settlement these CLOs may be considered
less liquid than similar CLOs available in the secondary market. In such
circumstances the Fund bears a risk of loss if the value of the CLO declines
before the settlement date or if the Fund is required to sell the CLO prior to
settlement. There is also the risk that the security will not be issued or that
the counterparty will not meet its obligation, resulting in a loss of the
investment opportunity.
Market
Risk. The value of the Fund’s portfolio may decrease if
the value of an individual security, or multiple securities, in the portfolio
decreases. Further, regardless of how well individual securities perform, the
value of the Fund’s portfolio could also decrease if there are deteriorating
economic or market conditions. It is important to understand that the value of
your investment may fall, sometimes sharply, in response to changes in the
market, and you could lose money. Market risk may affect a single issuer,
industry, economic sector, or the market as a whole. Market risk may be
magnified if certain social, political, economic and other conditions and events
(such as terrorism, conflicts, social unrest, natural disasters, epidemics and
pandemics, including the COVID-19 outbreak) adversely interrupt the global
economy and financial markets.
Derivatives
Risk. Derivatives, such as swaps, forwards, and futures
involve risks in addition to the risks of the underlying referenced securities
or asset. Gains or losses from a derivative investment can be substantially
greater than the derivative’s original cost and can therefore involve leverage
and the potential for increased volatility. The Fund may be subject to increased
liquidity risk to the extent its derivative positions become illiquid.
Derivatives also involve the risk that the counterparty to the derivative
transaction will default on its payment obligations. While use of derivatives to
hedge can reduce or eliminate losses, it can also reduce or eliminate gains or
cause losses if the market moves in a manner different from that anticipated by
the portfolio managers or if the cost of the derivative outweighs the benefit of
the hedge.
Management
Risk. The Fund is an actively
managed investment portfolio and is therefore subject to the risk that the
investment strategies employed for the Fund may fail to produce the intended
results. Although the Fund seeks to provide long-term positive returns, market
conditions or implementation of the Fund’s investment process may result in
losses, and the Fund may not meet its investment objective. As such, there can
be no assurance of positive “absolute” returns.
5½Janus Henderson AAA CLO ETF
Exchange Listing and
Trading Issues Risk. Although Fund shares are listed
for trading on the NYSE Arca, Inc. (the “Exchange”), there can be no assurance
that an active trading market for such shares will develop or be maintained. The
lack of an active market for Fund shares, as well as periods of high volatility,
disruptions in the creation/redemption process, or factors affecting the
liquidity of the underlying securities held by the Fund, may result in the
Fund’s shares trading at a premium or discount to its
NAV.
Trading
in Fund shares may be halted due to market conditions or for reasons that, in
the view of the Exchange, make trading in Fund shares inadvisable. In addition,
trading is subject to trading halts caused by extraordinary market volatility
pursuant to the Exchange’s “circuit breaker” rules. There can be no assurance
that the requirements of the Exchange necessary to maintain the Fund’s listing
will continue to be met or will remain unchanged.
Fluctuation of NAV
and Market Price Risk. The NAV of the Fund’s shares
will generally fluctuate with changes in the market value of the Fund’s
securities holdings. The market prices of the Fund’s shares will generally
fluctuate in accordance with changes in the Fund’s NAV and supply and demand of
shares on the Exchange. Volatile market conditions, an absence of trading in
shares of the Fund, or a high volume of trading in the Fund, may result in
trading prices in the Fund’s shares that differ significantly from the Fund’s
NAV. Additionally, during a “flash crash,” the market prices of the Fund’s
shares may decline suddenly and significantly, resulting in Fund shares trading
at a substantial discount to NAV. Such a decline may not reflect the performance
of the portfolio securities held by the Fund. Flash crashes may cause Authorized
Participants and other market makers to limit or cease trading in the Fund’s
shares for temporary or longer periods, which may result in an increase in the
variance between market price of the Fund’s shares and the Fund’s NAV.
Shareholders could suffer significant losses to the extent that they sell shares
at these temporarily low market
prices.
It
cannot be predicted whether Fund shares will trade below, at or above the Fund’s
NAV. Further, the securities held by the Fund may be traded in markets that
close at a different time than the Exchange. Liquidity in those securities may
be reduced after the applicable closing times. Accordingly, during the time when
the Exchange is open but after the applicable market closing or fixing
settlement times, bid‑ask spreads and the resulting premium or discount to the
Fund shares’ NAV is likely to widen. Similarly, the Exchange may be closed at
times or days when markets for securities held by the Fund are open, which may
increase bid‑ask spreads and the resulting premium or discount to the Fund
shares’ NAV when the Exchange re‑opens. The Fund’s bid‑ask spread and the
resulting premium or discount to the Fund’s NAV may also be impacted by the
liquidity of the underlying securities held by the Fund, particularly in
instances of significant volatility of the underlying
securities.
Authorized
Participant Risk. The Fund may have a limited number of
financial institutions that may act as Authorized Participants (“APs”). Only APs
who have entered into agreements with the Fund’s distributor may engage in
creation or redemption transactions directly with the Fund. These APs have no
obligation to submit creation or redemption orders and, as a result, there is no
assurance that an active trading market for the Fund’s shares will be
established or maintained. This risk may be heightened to the extent that the
securities underlying the Fund are traded outside of a collateralized settlement
system. In that case, APs may be required to post collateral on certain trades
on an agency basis (i.e., on behalf of other market participants), which only a
limited number of APs may be willing or able to do. Additionally, to the extent
that those APs exit the business or are unable to process creation and/or
redemption orders, and no other AP is able to step forward to create and redeem
in either of these cases, shares may trade like closed‑end fund shares at a
premium or a discount to NAV and possibly face
delisting.
An investment in the Fund is not a
bank deposit and is not insured or guaranteed by the Federal Deposit Insurance
Corporation or any other government
agency.
The following
information provides some indication of the risks of investing in the Fund by
showing how the Fund’s performance has varied over time. The bar chart depicts
the change in performance from year to year during the periods
indicated. The table compares the Fund’s average
annual returns for the periods indicated to a broad-based securities market
index. The index is not available for direct investment. All figures assume
reinvestment of dividends and distributions and include the effect of the Fund’s
recurring expenses.
The Fund’s past performance
(before and after taxes) does not necessarily indicate how it will perform in
the future. Updated performance
information is available at janushenderson.com/performance
or by calling 800‑668‑0434.
6½Janus Henderson AAA CLO ETF
Janus
Henderson AAA CLO ETF
|
Annual Total Returns (calendar
year‑end) |
|
Best
Quarter:1st Quarter 2021 0.51% Worst
Quarter: 4th Quarter 2021 0.20% |
|
|
|
|
|
|
|
|
|
Average
Annual Total Returns (periods ended 12/31/21) |
|
|
|
|
|
|
|
|
1 Year |
|
|
Since Inception
10/16/2020 |
|
Janus Henderson AAA CLO ETF |
|
|
|
|
|
|
|
|
Return Before
Taxes |
|
|
1.35 |
% |
|
|
1.80 |
% |
Return After Taxes on
Distributions |
|
|
0.86 |
% |
|
|
1.30 |
% |
Return After Taxes on Distributions and
Sale of Fund Shares |
|
|
0.80 |
% |
|
|
1.17 |
% |
J.P. Morgan CLOIE AAA Total Return
Index (reflects no deductions for fees, expenses or
taxes) |
|
|
1.40 |
% |
|
|
1.95 |
% |
After‑tax returns in the table
above are calculated using the historical highest individual U.S. federal
marginal income tax rates and do not reflect the impact of state or local
taxes. Actual after‑tax returns
depend on your individual tax situation and may differ from those shown in the
preceding table. The after‑tax return information shown above does not apply to
Fund shares held through a tax‑advantaged account, such as a 401(k) plan or an
IRA.
Investment Adviser: Janus Henderson
Investors US LLC
Portfolio Managers: John Kerschner, CFA, is
Co‑Portfolio Manager of the Fund, which he has co‑managed since inception. Nick Childs, CFA, is Co‑Portfolio Manager
of the Fund, which he has co‑managed since inception.
|
PURCHASE AND SALE OF FUND SHARES |
The
Fund is an actively-managed ETF. Unlike shares of traditional mutual funds,
shares of the Fund are not individually redeemable and may only be purchased or
redeemed directly from the Fund at NAV in large increments called “Creation
Units” through APs and the Adviser may modify the Fund’s Creation Unit size with
prior notification to the Fund’s APs. See the ETF portion of the Janus Henderson
website for the Fund’s current Creation Unit size. The Fund generally issues
Creation Units in exchange for cash or portfolio securities (and an amount of
cash), and generally redeems Creation Units in exchange for portfolio securities
(and an amount of cash) that the Fund specifies each day. Except when aggregated
in Creation Units, Fund shares are not redeemable securities of the Fund.
Shares
of the Fund are listed and trade on NYSE Arca, and individual investors can
purchase or sell shares in much smaller increments for cash in the secondary
market through a broker-dealer. These transactions, which do not involve the
Fund, are made at market prices that may vary throughout the day and differ from
the Fund’s NAV. As a result, you may pay more than NAV (at a premium) when you
purchase shares, and receive less than NAV (at a discount) when you sell shares,
in the secondary market.
7½Janus Henderson AAA CLO ETF
Investors
purchasing or selling shares in the secondary market may also incur additional
costs, including brokerage commissions and an investor may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (bid) and the lowest price a seller is
willing to accept for shares of the Fund (ask) when buying or selling shares in
the secondary market (the “bid‑ask spread”). Historical information regarding
the Fund’s bid/ask spread can be accessed on the Fund’s website at
janushenderson.com/performance by selecting the Fund.
The
Fund’s distributions are generally taxable, and will be taxed as ordinary income
or capital gains, unless you are investing through a tax‑advantaged arrangement,
such as a 401(k) plan or an individual retirement account (in which case you may
be taxed at ordinary income tax rates upon withdrawal of your investment from
such account). A sale of Fund shares may result in a capital gain or loss.
|
PAYMENTS TO BROKER‑DEALERS AND OTHER FINANCIAL INTERMEDIARIES |
If
you purchase the Fund through a broker-dealer or other financial intermediary
(such as a bank), the Adviser and/or its affiliates may pay broker-dealers or
intermediaries for the sale and/or maintenance of Fund shares and related
services. These payments may create a conflict of interest by influencing the
broker-dealer or other intermediary and your salesperson to recommend the Fund
over another investment. Ask your salesperson or visit your financial
intermediary’s website for more information.
8½Janus Henderson AAA CLO ETF
ADDITIONAL
INFORMATION ABOUT THE
FUND
Please refer to the following important information
when reviewing the “Fees and Expenses of the Fund” table in the
Fund Summary of the Prospectus. Except as otherwise indicated, the fees
and expenses shown were determined based on average net assets as of the Fund’s
most recent fiscal year ended October 31, 2021.
• |
|
“Annual
Fund Operating Expenses” are paid out of the Fund’s assets. You do not pay
these fees directly but, as the Example in the Fund Summary shows, these
costs are borne indirectly by all shareholders. |
• |
|
The
“Management Fee” is the rate paid by the Fund to the Adviser for providing
certain services. Refer to “Management Expenses” in this Prospectus for
additional information with further description in the Statement of
Additional Information (“SAI”). |
|
° |
|
include
taxes and governmental fees, brokerage fees, commissions and other
transaction expenses, costs of borrowing money, including interest
expenses, securities lending expenses, and extraordinary expenses (such as
litigation and indemnification expenses). |
|
° |
|
include acquired fund
fees and expenses, which are indirect expenses the Fund may incur as a
result of investing in shares of an underlying fund to the extent such
expenses are less than 0.01%. “Acquired Fund” refers to any underlying
fund (including, but not limited to, business development companies and
exchange-traded funds) in which a fund invests or has invested during the
period. If applicable, or unless otherwise indicated in the Fund’s Fees
and Expenses table, such amounts are less than 0.01% and are included in
the Fund’s “Other Expenses.” |
|
ADDITIONAL INVESTMENT STRATEGIES AND GENERAL PORTFOLIO POLICIES |
The
Fund is an actively managed ETF and, thus, does not seek to replicate the
performance of a specified index. Accordingly, the portfolio managers have
discretion on a daily basis to manage the Fund’s portfolio in accordance with
the Fund’s investment objective. The portfolio managers apply a “bottom up”
approach to selecting investments to purchase and sell. This means that the
portfolio managers look at securities one at a time to determine if a security
is an attractive investment opportunity and if it is consistent with the Fund’s
investment policies. The portfolio managers’ analysis with respect to security
selection includes due diligence of CLO managers to discern each manager’s
investment process, credit sector analysis, risk appetite and approach to risk
management. Additional factors, such as the CLO manager’s tenure and track
record in the CLO market, issuance record and secondary market trading
frequency, assist in the portfolio managers’ analysis of both quality and
liquidity. Under normal circumstances, the Fund will generally sell or dispose
of its portfolio investments to take advantage of mispricing in the secondary
market or when, in the opinion of the Adviser, the initial investment thesis
changes with respect to a particular security or CLO manager, including as the
result of changing market conditions. The Fund is designed for investors who
seek exposure to an actively managed portfolio consisting primarily of AAA‑rated
CLOs.
The
Fund’s Board of Trustees (“Trustees”) may change the Fund’s investment objective
or non‑fundamental principal investment strategies without a shareholder vote.
The Fund will notify you in writing at least 60 days or as soon as reasonably
practicable before making any such change it considers material, including but
not limited to a material change in the Fund’s policy to invest at least 90% of
its net assets (plus borrowings for investment purposes) in CLOs of any maturity
that are rated AAA (or equivalent by an NRSRO) at the time of purchase, or, if
unrated, are determined to be of comparable credit quality by the Adviser. If
there is a material change to the Fund’s investment objective or principal
investment strategies, you should consider whether the Fund remains an
appropriate investment for you. There is no guarantee that the Fund will achieve
its investment objective.
On
each business day before commencement of trading in shares on the NYSE Arca, the
Fund will disclose on janushenderson.com/info the identities and quantities of
each portfolio position held by the Fund that will form the basis for the Fund’s
next calculation of NAV per share. A description of the Fund’s policies and
procedures with respect to the disclosure of the Fund’s portfolio holdings is
available in the Fund’s SAI. Information about the premiums and discounts at
which the Fund’s shares have traded is available at
janushenderson.com/performance by selecting the Fund for additional
details.
Unless
otherwise stated, the following additional investment strategies and general
policies apply to the Fund and provide further information including, but not
limited to, the types of securities the Fund may invest in when implementing its
investment objective. Some of these strategies and policies may be part of a
principal strategy. Other strategies and policies may
9½Janus Detroit Street Trust
be
utilized to a lesser extent as a complement to the Fund’s principal strategy.
Except for the Fund’s policies with respect to investments in illiquid
investments and borrowings, the percentage limitations included in these
policies and elsewhere in this Prospectus and/or the SAI normally apply only at
the time of purchase of a security. So, for example, if the Fund exceeds a limit
as a result of market fluctuations or the sale of other securities, it may not
be required to dispose of any securities. The “Glossary of Investment Terms”
includes descriptions of investment terms used throughout the Prospectus.
The
Fund may borrow to the extent permitted by the Investment Company Act of 1940,
as amended (“1940 Act”). At times, the Fund may be required to segregate or
earmark certain assets determined to be liquid by the Adviser to cover
borrowings.
Asset-Backed
Securities
CLOs
are a type of asset-backed security. Payments on asset-backed securities include both interest and a partial
payment of principal. The value of investments in asset-backed securities may be
adversely affected by changes in interest rates, factors concerning the
interests in and structure of the issuer or originator of the receivables, the
creditworthiness of the entities that provide any supporting letters of credit,
surety bonds, or other credit or liquidity enhancements, and/or the market’s
assessment of the quality of the underlying assets. Generally, the originating
bank or credit provider is neither the obligor nor the guarantor of the
security, and interest and principal payments ultimately depend upon payment of
the underlying loans by the borrower. The Fund could incur a loss if the
underlying loans are not paid. In addition, most asset-backed securities are
subject to prepayment. Prepayment risk is the risk that during periods of
falling interest rates, certain fixed-income securities with higher interest
rates, such as mortgage- and asset-backed securities, may be prepaid by their
issuers thereby reducing the amount of interest payments. The impact of
prepayments on the value of asset-backed securities may be difficult to predict
and may result in greater volatility. Rising interest rates tend to extend the
duration of asset-backed securities, making them more volatile and sensitive to
changing interest rates.
Cash
Position
The
Fund may not always be or stay fully invested. The Fund may invest a portion of
its assets in cash, cash equivalents or other short-term instruments, such as
affiliated and non‑affiliated money market instruments (or unregistered cash
management pooled investment vehicles that operate as money market funds), while
deploying new capital, for liquidity management purposes, managing redemptions,
or for defensive purposes, including navigating unusual market conditions. Such
cash or cash equivalents include U.S. Treasury securities, commercial paper,
repurchase agreements and other short-duration fixed-income securities, and/or
affiliated or non‑affiliated money market funds. When the Fund’s investments in
cash or cash equivalents increase, the Fund may not participate in market
advances or declines to the same extent that it would if it remained more fully
invested. To the extent the Fund invests its uninvested cash through a sweep
program (meaning its uninvested cash is pooled with uninvested cash of other
funds and invested in certain securities such as repurchase agreements), it is
subject to the risks of the account or fund into which it is investing,
including liquidity issues that may delay the Fund from accessing its
cash.
Collateralized
Loan Obligations
A
CLO is a type of structured credit, which is a sector of the fixed income market
that also includes asset-backed and mortgage-backed securities. Typically
organized as a trust or other special purpose vehicle, a CLO issues debt and
equity interests and uses the proceeds from this issuance to acquire a portfolio
of bank loans made primarily to businesses that are rated below investment
grade. The underlying loans in which a CLO may invest may be issued or offered
as “covenant lite” loans, which have few or no financial maintenance covenants.
The underlying loans are generally senior-secured/first-priority loans; however,
the CLO may also include an allowance for second-lien and/or unsecured debt.
Additionally, the underlying loans may include domestic and foreign senior
secured loans, senior unsecured loans and subordinate corporate loans, some of
which may individually be below investment grade or the equivalent if unrated.
The portfolio of underlying loans is actively managed by the CLO manager for a
fixed period of time (“reinvestment period”). During the reinvestment period,
the CLO manager may buy and sell individual loans to create trading gains or
mitigate loses. The CLO portfolio will generally be required to adhere to
certain diversification rules established by the CLO issuer to mitigate against
the risk of concentrated defaults within a given industry or sector. After a
specified period of time, the majority owner of equity interests in the CLO may
seek to call the CLO’s outstanding debt or refinance its position. If not called
or refinanced, when the reinvestment period ends, the CLO uses cash flows from
the underlying loans to pay down the outstanding debt tranches and wind up the
CLO’s operations.
Interests
in the CLOs are divided into two or more separate debt and equity tranches, each
with a different credit rating and risk/return profile based upon its priority
of claim on the cash flows produced by the underlying loan pool. Tranches are
categorized as senior, mezzanine and subordinated/equity, according to their
degree of credit risk. If there are defaults or the CLO’s collateral otherwise
underperforms, scheduled payments to senior tranches take precedence over those
of mezzanine
10½Janus Detroit Street Trust
tranches,
and scheduled payments to mezzanine tranches take precedence over those to
subordinated/equity tranches. The riskiest portion is the “Equity” tranche,
which bears the bulk of defaults from the loans in the trust and serves to
protect the other, more senior tranches from default in all but the most severe
circumstances. Senior and mezzanine tranches are typically rated, with the
former receiving ratings of A to AAA/Aaa and the latter receiving ratings of B
to BBB/Baa. The ratings reflect both the credit quality of underlying collateral
as well as how much protection a given tranche is afforded by tranches that are
subordinate to it. Normally, CLOs are privately offered and sold, and thus are
not registered under the securities laws. CLOs are typically floating-rate debt
instruments; however, in some cases, certain CLOs may pay a fixed-rate.
For
the purposes of implementing the Fund’s investment strategy, CLOs do not
include: Collateralized Debt Obligations (“CDOs”), Collateralized Bond
Obligations (“CBOs”) Commercial Real Estate CLOs (“CRE CLOs”), collateralized
mortgage obligations (“CMOs”), or other forms of asset-backed securities.
Credit
Quality
Under
normal circumstances, at least 90% of the portfolio will be invested in CLOs
rated AAA (or equivalent by a NRSRO), or if unrated, determined to be of
comparable credit quality by the Adviser at the time of purchase. No CLO, at the
time of purchase by the Fund, will have a rating that is below A‑ (or equivalent
by a NRSRO), or if unrated, determined to be of comparable credit quality by the
Adviser. After purchase, a CLO may have its rating reduced below the minimum
rating required by the Fund for purchases. In such cases, the Fund will consider
whether to continue to hold the CLO; however, under normal market conditions,
the Fund will seek to maintain at least 80% of its net assets in the AAA rated
CLOs.
When
calculating the quality assigned to securities that receive different ratings
from two or more agencies (“split-rated securities”), the security will receive:
(i) the middle rating from the three reporting agencies if three agencies
provide a rating for the security or (ii) the lowest rating if only two
agencies provide a rating for the security.
In
unforeseen or unusual circumstances, there may not be sufficient AAA rated CLOs
available in the market or that the portfolio managers deem appropriate for
investment to permit the Fund to maintain 80% of its net assets in AAA rated
CLOs. In such circumstances, the Fund will endeavor to maintain the highest
possible percentage of its net assets in the highest quality CLOs available at
that time.
Exchange-Traded
Funds
The
Fund may invest in exchange-traded funds (“ETFs”), including affiliated ETFs.
ETFs are typically open‑end investment companies that are traded on a national
securities exchange. ETFs typically incur fees, such as investment advisory fees
and other operating expenses that are separate from those of the Fund, which
will be indirectly paid by the Fund. As a result, the cost of investing in the
Fund may be higher than the cost of investing directly in ETFs and may be higher
than other mutual funds that invest directly in stocks and bonds. Since ETFs are
traded on an exchange at market prices that may vary from the net asset value of
their underlying investments, there may be times when ETFs trade at a premium or
discount. In the case of affiliated ETFs, unless waived, the Fund’s adviser will
earn fees both from the Fund and from the underlying ETF, with respect to assets
of the Fund invested in the underlying ETF. The Fund is also subject to the
risks associated with the securities in which the ETF invests.
Forward
Contracts
Forward
contracts are contracts to purchase or sell a specified amount of a financial
instrument for an agreed upon price at a specified time. Forward contracts are
not currently exchange-traded and are typically negotiated on an individual
basis. The Fund may only enter into forward currency contracts to hedge against
declines in the value of securities denominated in, or whose value is tied to, a
currency other than the U.S. dollar or to reduce the impact of currency
appreciation on purchases of such securities.
Illiquid
Investments
The
Fund will not acquire any illiquid investment if, immediately after the
acquisition, the Fund would have invested more than 15% of its net assets in
illiquid investments that are assets. An illiquid investment is any investment
that the Fund reasonably expects cannot be sold or disposed of in current market
conditions in seven calendar days or less without the sale or disposition
significantly changing the market value of the investment. For example, some
securities are not registered under U.S. securities laws and cannot be sold to
the U.S. public because of Securities and Exchange Commission (“SEC”)
regulations (these are known as “restricted securities”). Certain restricted
securities that are determined to be liquid will not be counted toward this 15%
limit.
11½Janus Detroit Street Trust
Interest
Rate Futures Contracts
Interest
rate futures contracts are typically exchange-traded and are typically used to
obtain interest rate exposure in order to manage duration and hedge interest
rate risk. The Fund may only utilize interest rate futures contracts as a means
to “hedge” its exposure to CLOs paying a fixed, rather than floating, interest
rate. An interest rate futures contract is a bilateral agreement where one party
agrees to accept and the other party agrees to make delivery of a specified
security, as called for in the agreement at a specified date and at an agreed
upon price. Generally, Treasury interest rate futures contracts are closed out
or rolled over prior to their expiration date.
Interest
Rate Swap Agreements
The
Fund may only utilize interest rate swap agreements as a means to “hedge” its
exposure to CLOs paying a fixed, rather than floating, interest rate. Interest
rate swaps involve the exchange by two parties of their respective commitments
to pay or receive interest (e.g., an exchange of floating rate payments for
fixed rate payments). Interest rate swaps are generally entered into on a net
basis. Interest rate swaps are centrally cleared and do not involve the delivery
of securities, other underlying assets, or principal. Accordingly, the risk of
loss with respect to interest rate swaps is limited to the net amount of
interest payments that the Fund is contractually obligated to make.
Leverage
The
Fund does not intend to use leverage for investment purposes. Leverage occurs
when the Fund increases its assets available for investment using when-issued,
delayed delivery, or forward commitment transactions, or other similar
transactions. In addition, other investment techniques, such as certain
derivative transactions, can create a leveraging effect.
Pass
Through Securities
Pass-through
securities (such as mortgage- and asset-backed securities) are debt securities
that normally give the issuer an option to pay cash at a coupon payment date or
give the holder of the security a similar bond with the same coupon rate and a
face value equal to the amount of the coupon payment that would have been made.
In the pass-through structure, principal and interest payments on the underlying
securities (less servicing fees) are passed through to shareholders on a pro
rata basis. These securities involve prepayment risk. In that case, the Fund may
have to reinvest the proceeds from the securities at a lower rate. Potential
market gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk.
Portfolio
Turnover
Portfolio
turnover rates are generally not a factor in making buy and sell decisions.
Changes may be made to the Fund’s portfolio, consistent with the Fund’s
investment objective and policies, when the portfolio managers believe such
changes are in the best interests of the Fund and its shareholders. Short-term
transactions may result from the purchase of a security in anticipation of
relatively short-term gains, liquidity needs, securities having reached a price
or yield objective, changes in interest rates or the credit standing of an
issuer, or by reason of economic or other developments not foreseen at the time
of the initial investment decision. The Fund may also sell one security and
simultaneously purchase the same or a comparable security to take advantage of
short-term differentials in bond yields or securities prices. Portfolio turnover
is affected by market conditions, changes in the size of the Fund (including due
to purchases and redemptions of Creation Units), the nature of the Fund’s
investments, and the investment style of the portfolio managers.
Increased
portfolio turnover may result in higher costs for brokerage commissions, dealer
mark‑ups, and other transaction costs, and may also result in taxable capital
gains. Higher costs associated with increased portfolio turnover also may have a
negative effect on the Fund’s performance.
Securities
Lending
The
Fund may seek to earn additional income through lending its securities to
certain qualified broker-dealers and institutions on a short-term or long-term
basis. The Fund may lend portfolio securities on a short-term or long-term
basis, in an amount equal to up to one‑third of its total assets as determined
at the time of the loan origination. When the Fund lends its securities, it
receives collateral (including cash collateral), at least equal to the value of
securities loaned. The Fund may earn income by investing this collateral in one
or more affiliated or non‑affiliated cash management vehicles. It is also
possible that, due to a decline in the value of a cash management vehicle in
which collateral is invested, the Fund may lose money. There is also the risk
that when portfolio securities are lent, the securities may not be returned on a
timely basis, and the Fund may experience delays and costs in recovering the
security or gaining access to the collateral provided to the Fund to
collateralize the loan. If the Fund is unable to recover a security on loan, the
Fund may use the collateral to purchase replacement securities in the market.
There is a risk that the value of the collateral could decrease below the cost
of the replacement security by the time the
12½Janus Detroit Street Trust
replacement
investment is made, resulting in a loss to the Fund. In certain circumstances,
individual loan transactions could yield negative returns. The Adviser intends
to manage the cash collateral in an affiliated cash management vehicle and will
receive an investment advisory fee for managing such assets.
U.S.
Government Securities
The
Fund may invest in U.S. Government securities. U.S. Government securities
include those issued directly by the U.S. Treasury, including Treasury
Inflation-Protected Securities (also known as TIPS), and those issued or
guaranteed by various U.S. Government agencies and instrumentalities. Some
government securities are backed by the “full faith and credit” of the United
States. Other government securities are backed only by the rights of the issuer
to borrow from the U.S. Treasury. Others are supported by the discretionary
authority of the U.S. Government to purchase the obligations. Certain other
government securities are supported only by the credit of the issuer. For
securities not backed by the full faith and credit of the United States, the
Fund must look principally to the agency or instrumentality issuing or
guaranteeing the securities for repayment and may not be able to assert a claim
against the United States if the agency or instrumentality does not meet its
commitment. Such securities may involve increased risk of loss of principal and
interest compared to government debt securities that are backed by the full
faith and credit of the United States.
Because
of the rising U.S. Government debt burden, it is possible that the U.S.
Government may not be able to meet its financial obligations or that securities
issued or backed by the U.S. Government may experience credit downgrades. Such a
credit event may adversely affect the financial markets.
Variable-
and Floating-Rate Obligations
The
Fund’s CLO investments (and the underlying loan investments of these CLOs) will
typically have variable or floating rates of interest which, under certain
limited circumstances, may have varying principal amounts. Variable and floating
rate securities pay interest at rates that are adjusted periodically according
to a specified formula, usually with reference to some interest rate index or
market interest rate (the “underlying index”). The floating rate tends to
decrease the security’s price sensitivity to changes in interest rates. These
types of securities are relatively long-term instruments that often carry demand
features permitting the holder to demand payment of principal at any time or at
specified intervals prior to maturity.
Other
Types of Investments
Unless
otherwise stated within its specific investment policies, the Fund may also
invest in other types of U.S. dollar denominated securities and use other
investment strategies, as described in the “Glossary of Investment Terms.” These
securities and strategies are not intended to be principal investment strategies
of the Fund. If successful, they may benefit the Fund by earning a return on the
Fund’s assets or reducing risk; however, they may not achieve the Fund’s
investment objective.
The
value of your investment will vary over time, sometimes significantly, and you
may lose money by investing in the Fund. The following information is intended
to help you better understand some of the risks of investing in the Fund. The
impact of the following risks on the Fund may vary depending on the Fund’s
investments. The greater the Fund’s investment in a particular security, the
greater the Fund’s exposure to the risks associated with that security. Before
investing in the Fund, you should consider carefully the risks that you assume
when investing in the Fund.
Affiliated Underlying
Fund Risk. The
Adviser may invest in certain affiliated ETFs as investments for the Fund. The
Adviser will generally receive fees for managing such funds, in addition to the
fees paid to the Adviser by the Fund. The payment of such fees by affiliated
funds creates a conflict of interest when selecting affiliated funds for
investment in the Fund. The Adviser, however, is a fiduciary to the Fund and its
shareholders and is legally obligated to act in its best interest when selecting
affiliated funds. In addition, the Adviser has contractually agreed to waive
and/or reimburse a portion of the Fund’s management fee in an amount equal to
the management fee it earns as an investment adviser to any of the affiliated
ETFs with respect to the Fund’s investment in such ETF, less certain operating
expenses.
Brexit
Risk. The risk of investing in British or European
issuers may be heightened due to the withdrawal of the United Kingdom from the
European Union (“EU”) in January 2020 (commonly known as “Brexit”) and the
expiration of the eleven-month transition period in December 2020. The negative
impact of Brexit on the United Kingdom and European economies could potentially
result in increased volatility and illiquidity and lower economic growth for
companies that rely significantly on the United Kingdom and/or Europe for their
business activities and revenues. Any further exits from the EU, or an increase
in the belief that such exits are likely or possible, would likely cause
additional market disruption globally and introduce new legal and regulatory
uncertainties. While certain measures have been or may be proposed or
introduced, at the EU level or at the
13½Janus Detroit Street Trust
member
state level, which are designed to minimize disruption in the financial markets,
it is not currently possible to determine whether such measures would achieve
their intended effects. To the extent that the Fund has exposure to British or
European markets or to transactions tied to the value of the pound sterling or
euro, these events could negatively affect the value and liquidity of the Fund’s
investments.
Cash Transaction
Risk. The Fund may require all APs to purchase Creation
Units in cash when the portfolio managers believe it is in the best interest of
the Fund. Cash purchases may cause the Fund to incur portfolio transaction fees
or charges or delays in investing the cash that it would otherwise not incur if
a purchase was made on an in‑kind basis. To the extent the Fund determines to
effect a Creation Unit redemption on a cash basis, it may be less tax‑efficient
for the Fund compared to an in‑kind redemption and may cause the Fund to incur
portfolio transaction fees or charges it would not otherwise incur with an
in‑kind redemption, to the extent such fees or charges are not offset by the
redemption transaction fee paid by APs. In addition, the Fund’s use of cash
transactions may result in wider bid‑ask spreads in Fund shares trading in the
secondary market as compared to ETFs that transact exclusively on an in‑kind
basis.
CLO Manager
Risk. CLOs are managed by investment advisers
independent of the Adviser. CLO managers are responsible for selecting, managing
and replacing the underlying bank loans within a CLO. CLO managers may have
limited operating histories, may be subject to conflicts of interests, including
managing the assets of other clients or other investment vehicles, or receiving
fees that incentivize maximizing the yield, and indirectly the risk, of a CLO.
Adverse developments with respect to a CLO manager, such as personnel and
resource constraints, regulatory issues or other developments that may impact
the ability and/or performance of the CLO manager, may adversely impact the
performance of the CLO securities in which the Fund invests.
CLO
Risk. The risks of investing in a CLO can be generally
summarized as a combination of economic risks of the underlying loans combined
with the risks associated with the CLO structure governing the priority of
payments. The degree of such risk will generally correspond to the specific
tranche in which the Fund is invested. The Fund intends to invest primarily in
AAA‑rated tranches; however, this rating does not constitute a guarantee and in
stressed market environments it is possible that even senior CLO tranches could
experience losses due to actual defaults, increased sensitivity to defaults due
to collateral default and the disappearance of the subordinated/equity tranches,
market anticipation of defaults, as well as negative market sentiment with
respect to CLO securities as an asset class. The Fund’s portfolio managers may
not be able to accurately predict how specific CLOs or the portfolio of
underlying loans for such CLOs will react to changes or stresses in the market,
including changes in interest rates. The most common risks associated with
investing in CLOs are interest rate risk, credit risk, liquidity risk,
prepayment risk, and the risk of default of the underlying asset, among
others.
Counterparty
Risk. Fund transactions involving
a counterparty are subject to the risk that the counterparty or a third party
will not fulfill its obligation to the Fund (“counterparty risk”). Counterparty
risk may arise because of the counterparty’s financial condition (i.e.,
financial difficulties, bankruptcy, or insolvency), market activities and
developments, or other reasons, whether foreseen or not. A counterparty’s
inability to fulfill its obligation may result in significant financial loss to
the Fund. The Fund may be unable to recover its investment from the counterparty
or may obtain a limited recovery, and/or recovery may be delayed. The Fund may
be exposed to counterparty risk to the extent it participates in lending its
securities to third parties and/or cash sweep arrangements whereby the Fund’s
cash balance is invested in one or more types of cash management vehicles. In
addition, the Fund may be exposed to counterparty risk through its investments
in certain securities, including, but not limited to, repurchase agreements,
debt securities, and derivatives (including various types of forwards, futures,
and options). The Fund intends to enter into financial transactions with
counterparties that the Adviser believes to be creditworthy at the time of the
transaction. There is always the risk that the Adviser’s analysis of a
counterparty’s creditworthiness is incorrect or may change due to market
conditions. To the extent that the Fund focuses its transactions with a limited
number of counterparties, it will have greater exposure to the risks associated
with one or more counterparties.
Credit Quality
Risk. The Fund is subject to the
risks associated with the credit quality of the issuers of debt securities.
Credit quality measures the likelihood that the issuer or borrower will meet its
obligations on a bond. One of the fundamental risks is credit risk, which is the
risk that an issuer will be unable to make principal and interest payments when
due, or default on its obligations. Higher credit risk may negatively impact the
Fund’s returns and yield. U.S. Government securities are generally considered to
be the safest type of investment in terms of credit risk. Municipal obligations
generally rank between U.S. Government securities and corporate debt securities
in terms of credit safety. Corporate debt securities, particularly those rated
below investment grade, present the highest credit risk.
Many
debt securities, including most CLOs, receive credit ratings from NRSROs such as
Standard & Poor’s, Fitch, and Moody’s. These NRSROs assign ratings to
securities by assessing the likelihood of issuer default. The lower a bond issue
is rated by an
14½Janus Detroit Street Trust
agency,
the more credit risk it is considered to represent. Lower rated instruments and
securities generally pay interest at a higher rate to compensate for the
associated greater risk. Interest rates can fluctuate in response to economic or
market conditions, which can result in a fluctuation in the price of a security
and impact your return and yield. If a security has not received a rating, the
Fund must rely upon the Adviser’s credit assessment, which if incorrect can also
impact the Fund’s returns and yield. Please refer to the “Explanation of Rating
Categories” section of this Prospectus for a description of debt rating
categories.
Debt Securities
Risk. Variable‑and floating-rate debt obligations
(including CLOs and the portfolio of loans underlying the CLOs), as well as
fixed-income debt instruments are subject to the following risks.
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Liquidity
Risk. Liquidity risk refers to the possibility that the
Fund may not be able to sell or buy a security or close out an investment
contract at a favorable price or time. Consequently, the Fund may have to
accept a lower price to sell a security, sell other securities to raise
cash, or give up an investment opportunity, any of which could have a
negative effect on the Fund’s performance. Infrequent trading of
securities also may lead to an increase in their price volatility. CLOs,
and their underlying loan obligations, are typically not registered for
sale to the public therefore are subject to certain restrictions on
transfer and sale, potentially making them less liquid than other types of
securities. Additionally, when the Fund purchases a newly issued CLO
directly from the issuer (rather than from the secondary market), there
often may be a delayed settlement period, during which time, the liquidity
of the CLO may be further reduced. During periods of limited liquidity and
higher price volatility, the Fund’s ability to acquire or dispose of CLOs
at a price and time the Fund deems advantageous may be impaired. CLOs are
generally considered to be long-term investments and there is no guarantee
that an active secondary market will exist or be maintained for any given
CLO. |
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Interest Rate
Risk. As interest rates decrease, issuers of the
underlying loan obligations may refinance any floating rate loans, which
will result in a reduction in the principal value of the CLO’s portfolio
and required the CLO to reinvest cash at inopportune time. Conversely, as
interest rates rise, borrowers with floating rate loans may experience
difficulty in making payments, resulting and delinquencies and defaults,
which will result in a reduction in cash flow to the CLO and the CLO
investors. An increase in interest rates may cause the value of
fixed-income securities held by the Fund to decline. The Fund may be
subject to a greater risk of rising interest rates due to the current
period of historically low rates and the effect of potential government
fiscal policy initiatives and resulting market reaction to those
initiatives. |
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Floating Rate Obligations
Risk. Securities with floating or variable interest
rates can be less sensitive to interest rate changes than securities with
fixed interest rates, but may decline in value if their interest rates do
not rise as much, or as quickly, as interest rates in general. Conversely,
floating rate securities will not generally increase in value if interest
rates decline. A decline in interest rates may result in a reduction of
income received from floating rate securities held by the Fund and may
adversely affect the value of the Fund’s shares. Generally, floating rate
securities carry lower yields than fixed notes of the same maturity. The
interest rate for a floating rate note resets or adjusts periodically by
reference to a benchmark interest rate. The impact of interest rate
changes on floating rate investments is typically mitigated by the
periodic interest rate reset of the investments. Securities with longer
durations tend to be more sensitive to interest rate changes, usually
making them more volatile than securities with shorter durations.
Benchmark interest rates, such as LIBOR, may not accurately track market
interest rates. |
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Credit Risk. Debt
issuers and other counterparties may not honor their obligations or may
have their debt downgraded by an NRSRO. For CLOs, the primary source of
credit risk is the ability of the underlying portfolio of loans to
generate sufficient cash flow to pay investors on a full and timely basis
when principal and/or interest payments are due. Default in payment on the
underlying loans will result in less cash flow from the underlying
portfolio and, in turn, less funds available to pay investors in the
CLO. |
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Call Risk. During
periods of falling interest rates, an issuer of a callable bond held by
the Fund may “call” or repay the security before its stated maturity. CLOs
are typically structured such that, after a specified period of time, the
majority investor in the equity tranche can call (i.e., redeem) the
securities issued by the CLO in full. The Fund may not be able to
accurately predict when or which of its CLO investments may be called,
resulting in the Fund having to reinvest the proceeds in unfavorable
circumstances, resulting in a decline in the Fund’s
income. |
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Extension
Risk. During periods of rising interest rates, certain
debt obligations potentially including the portfolio of loans underlying a
CLO will be paid off substantially more slowly than originally anticipated
and the value of those securities may fall sharply, resulting in a decline
in the Fund’s income and potentially in the value of the Fund’s
investments. |
15½Janus Detroit Street Trust
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Income Risk. The
Fund’s income may decline if interest rates fall. This decline in income
can occur because most of the CLO debt instruments held by the Fund will
have floating or variable interest rates. |
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Valuation
Risk. Valuation Risk is the risk that one or more of the
debt securities in which the Fund invests are priced differently than the
value realized upon such security’s sale. In times of market instability,
valuation may be more difficult. The tiered structure of certain CLOs may
subject them to price volatility and enhanced liquidity requirements and
valuation risk in times of market stress. |
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Privately Issued Securities
Risk. CLOs are generally privately-issued securities,
and are normally purchased pursuant to Rule 144A or Regulation S
under the Securities Act. Privately-issued securities typically may be
resold only to qualified institutional buyers, in a privately negotiated
transaction, to a limited number of purchasers, or in limited quantities
after they have been held for a specified period of time and other
conditions are met for an exemption from registration. Because there may
be relatively few potential purchasers for such securities, especially
under adverse market or economic conditions or in the event of adverse
changes in the financial condition of the issuer, the Fund may find it
more difficult to sell such securities when it may be advisable to do so
or it may be able to sell such securities only at prices lower than if
such securities were more widely held and traded. At times, it also may be
more difficult to determine the fair value of such securities for purposes
of computing the Fund’s NAV due to the absence of an active trading
market. There can be no assurance that a privately-issued security
previously deemed to be liquid when purchased will continue to be liquid
for as long as it is held by the Fund, and its value may decline as a
result. |
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Covenant Lite Loans
Risk. Certain of the underlying loans in which a CLO may
invest may be issued or offered as “covenant lite” loans, which have few
or no financial maintenance covenants that would require a borrower to
maintain certain financial metrics. Because covenant lite loans contain
few or no financial maintenance covenants, they may not include terms that
permit the lender of the loan to monitor the borrower’s financial
performance and, if certain criteria are breached, declare a default,
which would allow the lender to restructure the loan or take other action
intended to help mitigate losses. As a result, a CLO could experience
relatively greater difficulty or delays in enforcing its rights on its
holdings of covenant lite loans than its holdings of loans or securities
with financial maintenance covenants, which may result in losses,
especially during a downturn in the credit
cycle. |
Derivatives
Risks. Derivatives, such as swaps, forwards and
futures, involve similar risks to those as the underlying referenced securities
or assets, such as risk related to interest rates, market, credit, valuation,
and liquidity, among others. There are also additional risks. Gains or losses
from a derivative investment can be substantially greater than the derivative’s
original cost, and can therefore involve leverage. Leverage may cause the Fund
to be more volatile than if it had not used leverage. Derivatives can be complex
instruments and may involve analysis that differs from that required for other
investment types used by the Fund. If the value of a derivative does not
correlate well with the particular market or other asset class to which the
derivative is intended to provide exposure, the derivative may not produce the
anticipated result. Derivatives can also reduce the opportunity for gain or
result in losses by offsetting positive returns in other investments.
Derivatives
can be less liquid than other types of investments and because most derivatives
are not eligible to be transferred in‑kind, the Fund may be subject to increased
liquidity risk to the extent its derivative positions become illiquid, relative
to an exchange-traded fund that is able to deliver its underlying investments
in‑kind to meet redemptions. Derivatives also entail the risk that the
counterparty will default on its payment obligations. If the counterparty to a
derivative transaction defaults, the Fund would risk the loss of the net amount
of the payments that it contractually is entitled to receive.
The
Fund uses derivatives only for currency and interest rate hedging purposes.
Hedging with derivatives may increase expenses, and there is no guarantee that a
hedging strategy will work. While hedging can reduce or eliminate losses, it can
also reduce or eliminate gains or cause losses if the market moves in a manner
different from that anticipated by the portfolio managers or if the cost of the
derivative outweighs the benefit of the hedge. The SEC has adopted a new
regulatory framework governing the use of derivatives by registered investment
companies (“Rule 18f-4”). The Fund will be required to implement and comply with
Rule 18f-4 by August 19, 2022. Once implemented, Rule 18f-4 will require a fund
that qualifies as a “limited derivatives user” (generally, a fund that limits
the notional amount of its derivatives transactions to 10% or less of its net
assets) to adopt and implement policies and procedures reasonably designed to
manage the fund’s derivatives risks, while a fund that does not so qualify will
be required to adopt and implement a written derivatives risk management program
and comply with a quantitative limit on the estimated potential risk of loss
that the fund incurs from its derivatives transactions. This new regulatory
framework will also eliminate the asset segregation and coverage framework
currently used by the fund to comply with Section 18 of the 1940 Act in
connection with derivatives and certain other financing transactions. As the
Fund transitions
16½Janus Detroit Street Trust
into
compliance with Rule 18f-4, the Fund’s approach to asset segregation and
coverage requirements described in this Prospectus may be impacted. These or
further changes in laws or regulations may make the use of derivatives more
costly, may limit the availability of derivatives, or may otherwise adversely
affect the use, value or performance of derivatives.
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Currency
Futures Risk. Currency futures are
similar to forward foreign currency exchange contracts, and pose similar
risks, except that futures contracts are standardized, exchange-traded
contracts while forward foreign currency exchange contracts are traded in
the over‑the‑counter market. The use of currency futures contracts may
substantially change the Fund’s exposure to currency exchange rates and
could result in losses to the Fund if currencies do not perform as
anticipated. Currency markets generally are not as regulated as securities
markets. In addition, currency rates may fluctuate significantly over
short periods of time, and can reduce returns. Currency futures may also
involve leverage risk. |
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Forward Foreign
Currency Exchange Contract Risk. Forward foreign
currency exchange contracts (“forward currency contracts”) involve the
risk that unanticipated changes in currency prices may negatively impact
the Fund’s performance. Moreover, there may be an imperfect correlation
between the Fund’s portfolio holdings of securities quoted or denominated
in a particular currency and any forward currency contracts entered into
by the Fund, which will expose the Fund to risk of foreign exchange loss.
The trading markets for forward currency contracts offer less protection
against defaults than trading in currency instruments on an exchange.
Because a forward currency contract is not guaranteed by an exchange or
clearinghouse, a default on the contract could result in losses to the
Fund and may force the Fund to cover its purchase or sale commitments, if
any, at the current market price. In addition, forward currency contract
markets can experience periods of illiquidity, which could prevent the
Fund from divesting of a forward currency contract at the optimal
time. |
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Interest Rate
Futures Risk. The Fund’s investments in interest
rate futures entail the risk that the Fund’s portfolio managers’
prediction of the direction of interest rates is wrong, and the Fund could
incur a loss. In addition, due to the possibility of price distortions in
the interest rate futures market, a correct forecast of general interest
rate trends by the portfolio managers may not result in the successful use
of interest rate futures. |
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Interest Rate
Swaps Risk. The Fund’s use of interest rate swaps
involves investment techniques and risks different from those associated
with ordinary portfolio security transactions. Interest rate swaps may
result in potential losses if interest rates do not move as expected or if
the counterparties are unable to satisfy their
obligations. |
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Treasury
Futures Contracts Risk. While transactions in
Treasury futures contracts may reduce certain risks, unanticipated changes
in interest rates or securities prices may result in a poorer overall
performance for the Fund than if it had not entered into any Treasury
futures contracts. To the extent the Fund uses Treasury futures contracts,
it is exposed to additional volatility and potential losses resulting from
leverage. Losses (or gains) involving Treasury futures contracts can
sometimes be substantial – in part because a relatively small price
movement in a Treasury futures contract may result in an immediate and
substantial loss (or gain) for the Fund. |
Eurozone
Risk. A number of countries in the European Union
(“EU”) have experienced, and may continue to experience, severe economic and
financial difficulties. In particular, many EU nations are susceptible to
economic risks associated with high levels of debt, notably due to investments
in sovereign debt. As a result, financial markets in the EU have been subject to
increased volatility and declines in asset values and liquidity. Responses to
these financial problems by European governments, central banks, and others,
including austerity measures and reforms, may not work, may result in social
unrest, and may limit future growth and economic recovery or have other
unintended consequences. All of these developments may continue to significantly
affect the economies of all EU countries, which in turn may have a material
adverse effect on the Fund’s investments in such countries, other countries that
depend on EU countries for significant amounts of trade or investment, or
issuers with exposure to debt issued by certain EU countries.
Exchange-Traded Funds
Risk. The Fund may invest in ETFs, including affiliated
ETFs. ETFs are typically open‑end investment companies that are traded on a
national securities exchange. ETFs typically incur fees, such as investment
advisory fees and other operating expenses that are separate from those of the
Fund, which will be indirectly paid by the Fund. As a result, the cost of
investing in the Fund may be higher than the cost of investing directly in the
underlying ETFs and may be higher than other ETFs or mutual funds that invest
directly in stocks and bonds. Since ETFs are traded on an exchange at market
prices that may vary from the net asset value of their underlying investments,
there may be times when ETFs trade at a premium or discount. In the case of
affiliated ETFs, unless waived, the Fund’s adviser will earn fees both from the
Fund and from the underlying ETF, with respect to assets of the Fund invested in
the underlying ETF. The Fund is also subject to the risks associated with the
securities in which the ETF invests.
17½Janus Detroit Street Trust
Fixed Income
Securities Risk. Typically, the values of fixed-income
securities change inversely with prevailing interest rates. Therefore, a
fundamental risk of fixed-income securities is interest rate risk, which is the
risk that the value of such securities will generally decline as prevailing
interest rates rise, which may cause the Fund’s net asset value to likewise
decrease. How specific fixed-income securities may react to changes in interest
rates will depend on the specific characteristics of each security. For example,
while securities with longer maturities and durations tend to produce higher
yields, they also tend to be more sensitive to changes in prevailing interest
rates and are therefore more volatile than shorter-term securities and are
subject to greater market fluctuations as a result of changes in interest rates.
Further, during periods of very low or negative interest rates, the Fund may not
be able to maintain positive returns. However, calculations of maturity and
duration may not reliably predict a security’s price sensitivity to changes in
interest rates. In addition, different interest rate measures (such as short-
and long-term interest rates and U.S. and non‑U.S. interest rates), or interest
rates on different types of securities or securities of different issuers, may
not necessarily change in the same amount or in the same direction. Investments
in fixed-income securities with very low or negative interest rates may diminish
the Fund’s yield and performance.
Fixed-income
securities are also subject to credit risk, which is the risk that the credit
strength of an issuer of a fixed-income security will weaken and/or that the
issuer will be unable to make timely principal and interest payments and that
the security may go into default. In addition, there is prepayment risk and
certain fixed-income securities with higher interest rates, such as mortgage-
and asset-backed securities, may be prepaid by their issuers thereby reducing
the amount of interest payments. This may result in the Fund having to reinvest
its proceeds in lower yielding securities. Fixed-income securities may also be
subject to valuation risk and liquidity risk. Valuation risk is the risk that
one or more of the fixed-income securities in which the Fund invests are priced
differently than the value realized upon such security’s sale. In times of
market instability, valuation may be more difficult. Liquidity risk is the risk
that fixed-income securities may be difficult or impossible to sell at the time
that the portfolio managers would like or at the price the portfolio managers
believe the security is currently worth. To the extent the Fund invests in
fixed-income securities in a particular industry or economic sector, its share
values may fluctuate in response to events affecting that industry or sector.
Securities underlying mortgage- and asset-backed securities, which may include
subprime mortgages, also may be subject to a higher degree of credit risk,
valuation risk, and liquidity risk.
The
market for certain fixed-income securities may become illiquid under adverse
market or economic conditions independent of any specific adverse changes in the
conditions of a particular issuer. For example, dealer capacity in certain
fixed-income markets appears to have undergone fundamental changes since the
financial crisis of 2008, which may result in low dealer inventories and a
reduction in dealer market-making capacity. The Fund may be subject to
heightened interest rate risk in times of monetary policy change and
uncertainty, such as when the Federal Reserve Board ends a quantitative easing
program and/or raises interest rates. The end of quantitative easing and/or
rising interest rates may expose fixed-income markets to increased volatility
and may reduce the liquidity of certain Fund investments. These developments
could cause the Fund’s net asset value to fluctuate or make it more difficult
for the Fund to accurately value its securities.
Foreign Exposure
Risk. The Fund may invest in foreign debt securities
either directly (e.g., in a CLO domiciled in a foreign country and/or
denominated in a foreign currency) or indirectly (e.g., the portfolio of loans
underlying a CLO are issued to foreign investors and/or in foreign currency) in
foreign markets. With respect to investments in securities of issuers or
companies that are economically tied to different countries throughout the
world, securities may be deemed to be economically tied to a particular country
based on such factors as the issuer’s country of incorporation, primary listing,
and other factors including, but not limited to operations, revenues,
headquarters, management, and shareholder base. Investments in foreign
securities may involve greater risks than investing in domestic securities
because the Fund’s performance may depend on factors other than the performance
of a particular security. These factors include:
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Currency
Risk. As long as the Fund holds a foreign
security or invests directly in foreign currencies, the value of the
security will be affected by the value of the local currency relative to
the U.S. dollar. When the Fund sells a foreign currency denominated
security, its value may be worth less in U.S. dollars even if the security
increases in value in its home country. U.S. dollar-denominated securities
of foreign issuers may also be affected by currency risk, as the value of
these securities may also be affected by changes in the issuer’s local
currency. |
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Political and
Economic Risk. Foreign investments may be subject
to heightened political and economic risks, particularly in emerging
markets which may have relatively unstable governments, immature economic
structures, national policies restricting investments by foreigners,
social instability, and different and/or developing legal systems. In some
countries, there is the risk that the government may take over the assets
or operations of a company or that the government may impose withholding
and other taxes or limits on the removal of the Fund’s assets from that
country. |
18½Janus Detroit Street Trust
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Regulatory
Risk. There may be less government supervision of
foreign markets. As a result, foreign issuers may not be subject to the
uniform accounting, auditing, and financial reporting standards and
practices applicable to domestic issuers, and there may be less publicly
available information about foreign issuers. |
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Foreign Market
Risk. Foreign securities markets may be less
liquid and more volatile than domestic markets. These securities markets
may trade a small number of securities, may have a limited number of
issuers and a high proportion of shares, or may be held by a relatively
small number of persons or institutions. Local securities markets may be
unable to respond effectively to increases in trading volume, potentially
making prompt liquidation of substantial holdings difficult or impossible
at times. It is also possible that certain markets may require payment for
securities before delivery, and delays may be encountered in settling
securities transactions. In some foreign markets, there may not be
protection against failure by other parties to complete transactions. It
may not be possible for the Fund to repatriate capital, dividends,
interest, and other income from a particular country or governmental
entity. |
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Geographic
Investment Risk. To the extent that the Fund
invests a significant portion of its assets in a particular country or
geographic region, the Fund will generally have more exposure to certain
risks due to possible political, economic, social, or regulatory events in
that country or region. Adverse developments in certain regions could also
adversely affect securities of other countries whose economies appear to
be unrelated and could have a negative impact on the Fund’s
performance. |
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Transaction
Costs. Costs of buying selling, and holding
foreign securities, including brokerage, tax, and custody costs, maybe
higher than those involved in domestic
transactions. |
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Settlement
Risk. Markets in different countries have
different clearance and settlement procedures and in certain markets there
have been times when settlements have been unable to keep pace with the
volume of transactions. Delays in settlement may increase credit risk to
the Fund, limit the ability of the Fund to reinvest the proceeds of a sale
of securities, and potentially subject the Fund to penalties for its
failure to deliver to subsequent purchasers of securities whose delivery
to the Fund was delayed. Delays in the settlement of securities purchased
by the Fund may limit the ability of the Fund to sell those securities at
times and prices it considers desirable, and may subject the Fund to
losses and costs due to its own inability to settle with subsequent
purchasers of the securities from it. The Fund may be required to borrow
monies it had otherwise expected to receive in connection with the
settlement of securities. |
Interest Rate
Risk. An increase in interest rates may cause the value
of fixed-income securities held by the Fund to decline. The Fund may be subject
to a greater risk of rising interest rates due to the current period of
historically low rates and the effect of potential government fiscal policy
initiatives and resulting market reaction to those initiatives. Variable and
floating rate securities may increase or decrease in value in response to
changes in interest rates, although generally to a lesser degree than
fixed-income securities. The Fund may use futures and interest rate swaps to
manage interest rate risk.
LIBOR Replacement
Risk. The Fund may invest in certain debt securities,
derivatives, or other financial instruments that utilize the London Inter-Bank
Offered Rate (“LIBOR”) as a reference rate for various rate calculations. The
U.K. Financial Conduct Authority has announced that it intends to stop
compelling or inducing banks to submit rates for many LIBOR settings after
December 31, 2021, and for certain other commonly-used U.S. dollar LIBOR
settings after June 30, 2023. The elimination of LIBOR or other reference
rates and the transition process away from LIBOR could adversely impact
(i) volatility and liquidity in markets that are tied to those reference
rates, (ii) the market for, or value of, specific securities or payments
linked to those reference rates, (iii) the availability or terms of
borrowing or refinancing, or (iv) the effectiveness of hedging strategies.
For these and other reasons, the elimination of LIBOR or other reference rates
may adversely affect the Fund’s performance and/or net asset value. Alternatives
to LIBOR are established or in development in most major currencies including
the Secured Overnight Financing Rate (“SOFR”) that is intended to replace the
U.S. dollar LIBOR.
The
effect of the discontinuation of LIBOR or other reference rates on the Fund will
vary depending on, among other things (i) existing fallback or termination
provisions in individual contracts and (ii) whether, how, and when industry
participants develop and adopt new reference rates and fallbacks for both legacy
and new products and instruments. Accordingly, it is difficult to predict the
full impact of the transition away from LIBOR or other reference rates on the
Fund until new reference rates and fallbacks for both legacy and new products,
instruments and contracts are commercially accepted.
Management
Risk. The Fund is an actively managed investment
portfolio and is therefore subject to the risk that the investment strategies
employed for the Fund may fail to achieve its investment objective or produce
the intended results. The Fund may underperform its benchmark index or other
funds with similar investment objectives.
Because
the Fund invests substantially all of its assets in debt securities, it is
subject to risks such as credit risk and interest rate fluctuations.
19½Janus Detroit Street Trust
The
Fund may use forward foreign currency contracts and/or futures contracts to
“hedge” or protect its portfolio from adverse movements in foreign currency
exposure. The Fund may use interest rate swap agreements and/or interest rate
futures to “hedge” exposure to fixed-rate CLOs to a floating interest rate.
There is no guarantee that the portfolio managers’ use of derivative investments
will benefit the Fund. The Fund’s performance could be worse than if the Fund
had not used such instruments. Use of such investments may instead increase risk
to the Fund, rather than reduce risk.
Market
Risk. The value of the Fund’s portfolio may decrease if
the value of an individual security, or multiple securities, in the portfolio
decreases. Further, regardless of how well individual securities perform, the
value of the Fund’s portfolio could also decrease if there are deteriorating
economic or market conditions, including, but not limited to, a decline in
consumer or commercial borrowing, or if the market favors different types of
securities than CLOs. If the value of the Fund’s portfolio decreases, the Fund’s
net asset value will also decrease, which means if you sell your shares in the
Fund you may lose money. Market risk may affect a single issuer, industry,
economic sector, or the market as a whole.
The
increasing interconnectivity between global economies and financial markets
increases the likelihood that events or conditions in one region or financial
market may adversely impact issuers in a different country, region or financial
market. Social, political, economic and other conditions and events, such as
natural disasters, health emergencies (e.g., the COVID‑19 outbreak, epidemics
and other pandemics), terrorism, conflicts and social unrest, could reduce
consumer demand or economic output, result in market closures, travel
restrictions and/or quarantines, and generally have a significant impact on the
global economies and financial markets. The effects of COVID‑19, which may
persist for an extended period of time, have contributed to increased volatility
in global financial markets and may affect certain countries, regions, issuers,
industries and market sectors more dramatically than others. These conditions
and events could have a significant impact on the Fund and its investments and
the processes and operations of the Fund’s service providers, including the
Adviser.
Market Trading
Risk. The Fund is subject to secondary market trading
risks. Shares of the Fund are listed for trading on an exchange; however, there
can be no guarantee that an active trading market for such shares will develop
or continue. Shares of the Fund may be listed or traded on U.S. and foreign
exchanges other than the Fund’s primary U.S. listing exchange. There can be no
guarantee that the Fund’s shares will continue trading on any exchange or in any
market or that the Fund’s shares will continue to meet the listing or trading
requirements of any exchange or market. The Fund’s shares may experience higher
trading volumes on one exchange as compared to another and investors are subject
to the execution and settlement risks of the market where their broker directs
trades.
Secondary
market trading in the Fund’s shares may be halted by an exchange because of
market conditions. Pursuant to exchange or market rules, trading in the Fund’s
shares on an exchange or in any market may be subject to trading halts caused by
extraordinary market volatility. There can be no guarantee that the Fund’s
exchange listing or ability to trade its shares will continue or remain
unchanged. In the event the Fund ceases to be listed on an exchange, the Fund
may cease operating as an “exchange-traded” fund and operate as a mutual fund,
provided that shareholders are given advance notice.
Shares
of the Fund may trade on an exchange at prices at, above, or below their most
recent NAV. The per share NAV of the Fund is calculated at the end of each
business day, as described below, and fluctuates with changes in the market
value of the Fund’s holdings. The trading prices of the Fund’s shares fluctuate
continuously throughout the trading day based on market supply and demand, and
may not closely track NAV. The trading prices of the Fund’s shares may differ
significantly from NAV during periods of market volatility, which may, among
other factors, lead to the Fund’s shares trading at a premium or discount to
NAV.
Buying
or selling the Fund’s shares on an exchange may require the payment of brokerage
commissions. In addition, you may also incur the cost of the spread (the
difference between the bid price and the ask price). The commission is
frequently a fixed amount and may be a significant cost for investors seeking to
buy or sell small amounts of shares. The spread varies over time for shares of
the Fund based on its trading volume and market liquidity, and is generally less
if the Fund has more trading volume and market liquidity and more if the Fund
has less trading volume and market liquidity. Due to the costs inherent in
buying or selling the Fund’s shares, frequent trading may detract significantly
from investment returns. Investment in the Fund’s shares may not be advisable
for investors who expect to engage in frequent trading.
Newly Issued
Securities Risk. The credit obligations in which the
Fund invests may include newly issued securities, or “new issues,” such as
initial debt offerings. New issues may have a magnified impact on the
performance of the Fund during periods in which it has a small asset base. The
impact of new issues on the Fund’s performance likely will decrease as the
Fund’s asset size increases, which could reduce the Fund’s returns. New issues
may not be consistently available to the Fund for investing, particularly as the
Fund’s asset base grows. Certain new issues, such as initial debt offerings, may
be volatile in price due to the
20½Janus Detroit Street Trust
absence
of a prior trading market, limited quantities available for trading and limited
information about the issuer. The Fund may hold new issues for a short period of
time. This may increase the Fund’s portfolio turnover and may lead to increased
expenses for the Fund, such as commissions and transaction costs. In addition,
new issues can experience an immediate drop in value after issuance if the
demand for the securities does not continue to support the offering price.
Operational
Risk. An investment in the Fund can involve operational
risks arising from factors such as processing errors, human errors, inadequate
or failed internal or external processes, failures in systems and technology,
changes to key personnel, technology and/or service providers, and errors caused
by third party service providers. Among other things, these errors or failures,
as well as other technological issues, may adversely affect the Fund’s ability
to calculate its net asset value, process fund orders, execute portfolio trades
or perform other essential tasks in a timely manner, including over a
potentially extended period of time. These errors or failures may also result in
a loss or compromise of information, regulatory scrutiny, reputational damage or
other events, any of which could have a material adverse effect on the Fund.
Implementation of business continuity plans by the Fund, the Adviser or
third-party service providers in response to disruptive events such as natural
disasters, epidemics and pandemics, terrorism, conflicts and social unrest may
increase these operational risks to the Fund. While the Fund seeks to minimize
such events through internal controls and oversight of third-party service
providers, there is no guarantee that the Fund will not suffer losses if such
events occur.
Private Placements
and Other Restricted Securities Risk. Investments in
private placements and other restricted securities, including securities issued
under Regulation S, could have the effect of increasing the Fund’s level of
illiquidity. Private placements and securities issued under Regulation S may be
less liquid than other investments because such securities may not always be
readily sold in broad public markets and the Fund might be unable to dispose of
such securities promptly or at prices reflecting their true value.
Rule 144A Securities
Risk. CLOs are generally not registered for sale to the
general public under the Securities Act but may be resold to certain
institutional investors. Accordingly, CLOs are treated as 144A securities. Such
securities may be determined to be liquid in accordance with the requirements of
Rule 22e‑4, under the 1940 Act. However, an insufficient number of qualified
institutional buyers interested in purchasing Rule 144A securities at a
particular time could affect negatively the Fund’s ability to dispose of such
securities promptly or at expected prices. As such, even if determined to be
liquid, the Fund’s investment in Rule 144A securities may subject the Fund to
enhanced liquidity risk and potentially increase the Fund’s exposure to illiquid
investments if eligible buyers become uninterested in buying Rule 144A
securities at a particular time.
Transaction and
Spread Risk. Investors buying or selling Fund shares in
the secondary market will pay brokerage commissions or other charges imposed by
brokers as determined by that broker. Brokerage commissions can be a fixed
amount and may be a significant proportional cost for investors seeking to buy
or sell relatively small amounts of shares. In addition, secondary market
investors will also incur the cost of the difference between the price that an
investor is willing to pay for shares (the “bid” price) and the price at which
an investor is willing to sell shares (the “ask” price). This difference in bid
and ask prices is often referred to as the “spread” or “bid/ask spread.” The
bid/ask spread varies over time for shares based on trading volume and market
liquidity, and is generally lower if the Fund’s shares have more trading volume
and market liquidity and higher if the Fund’s shares have little trading volume
and market liquidity. Further, increased market volatility and trading halts
affecting any of the Fund’s portfolio securities may cause increased bid/ask
spreads. Due to the costs of buying or selling shares, including bid/ask
spreads, frequent trading of shares may significantly reduce investment results
and an investment in shares may not be advisable for investors who anticipate
regularly making small investments.
Trading Issues
Risk. Although Fund shares are listed for trading on
the NYSE Arca, there can be no assurance that an active trading market for such
shares will develop or be maintained. Trading in Fund shares may be halted due
to market conditions or for reasons that, in the view of the NYSE Arca, make
trading in shares inadvisable. In addition, trading in shares is subject to
trading halts caused by extraordinary market volatility pursuant to the NYSE
Arca “circuit breaker” rules. There can be no assurance that the requirements of
the NYSE Arca necessary to maintain the listing of the Fund will continue to be
met or will remain unchanged or that the shares will trade with any volume, or
at all. In addition, during periods of significant volatility, the liquidity of
the underlying securities held by the Fund may affect the Fund’s trading prices.
During a “flash crash,” the market prices of the Fund’s shares may decline
suddenly and significantly. Such a decline may not reflect the performance of
the portfolio securities held by the Fund. Flash crashes may cause APs and other
market makers to limit or cease trading in the Fund’s shares for temporary or
longer periods. Shareholders could suffer significant losses to the extent that
they sell shares at these temporarily low market prices.
The
risks are described further in the SAI.
21½Janus Detroit Street Trust
MANAGEMENT
OF THE FUND
Janus
Henderson Investors US LLC, 151 Detroit Street, Denver, Colorado 80206-4805, is
the investment adviser to the Fund. Effective January 3, 2022 the Adviser
changed its name from Janus Capital Management LLC to Janus Henderson Investors
US LLC. The Adviser is responsible for the day‑to‑day management of the Fund’s
investment portfolio and furnishes continuous advice and recommendations
concerning the Fund’s investments. The Adviser also provides certain
administration and other services and is responsible for other business affairs
of the Fund.
The
Adviser (together with its predecessors and affiliates) has served as investment
adviser to Janus Henderson mutual funds since 1970 and currently serves as
investment adviser to all of the Janus Henderson funds, including Janus
Henderson exchange-traded funds, acts as subadviser for a number of
private-label mutual funds, and provides separate account advisory services for
institutional accounts and other unregistered products.
The
Fund may rely on SEC exemptive and no action relief that permits the Adviser,
subject to the approval of the Trustees, to appoint or replace affiliated and
unaffiliated subadvisers to manage all or a portion of the Fund’s assets and
enter into, amend, or terminate such subadvisory agreements without obtaining
shareholder approval (a “manager‑of‑managers structure”).
Pursuant
to the relief, the Adviser, with the approval of the Trustees, has the ultimate
responsibility, subject to oversight by the Board, to oversee subadvisers and
recommend their hiring, termination and replacement. The Adviser, subject to the
review and oversight of the Trustees, has responsibility to: set the Fund’s
overall investment strategy; evaluate, select and recommend subadvisers to
manage all or a portion of the Fund’s assets; and implement procedures
reasonably designed to ensure that each subadviser complies with the Fund’s
investment goal, policies and restrictions. Subject to review and oversight by
the Trustees, under the manager‑of‑managers‑ structure, the Adviser will
allocate and, when appropriate, reallocate the Fund’s assets among subadvisers
and monitor and evaluate the subadvisers’ performance. The relief also permits
the Fund to disclose subadvisers’ fees only in the aggregate in the SAI. In the
event that the Adviser hires a new subadviser pursuant to the
manager‑of‑managers structure, the Fund would provide shareholders with
information about the new subadviser and subadvisory agreement within 90
days.
The
Trustees and the initial shareholder of the Fund have approved the use of a
manager‑of‑managers structure for the Fund.
The
Fund uses a unitary fee structure, under which the Fund pays the Adviser a
“Management Fee” in return for providing certain investment advisory,
supervisory, and administrative services to the Fund, including the costs of
transfer agency, custody, fund administration, legal, audit, and other services.
The Adviser’s fee structure is designed to pay substantially all of the Fund’s
expenses. However, the Fund bears other expenses which are not covered under the
Management Fee which may vary and affect the total level of expenses paid by
shareholders, such as distribution fees (if any), brokerage expenses or
commissions, interest and dividends (including those relating to short positions
(if any)), taxes, litigation expenses, acquired fund fees and expenses (if any),
and extraordinary expenses.
The
Fund’s Management Fee is calculated daily and paid monthly. The Fund’s advisory
agreement details the Management Fee and other expenses that the Fund must
pay.
The
following table reflects the Fund’s contractual Management Fee rate (expressed
as an annual rate). The rates shown are fixed rates based on the Fund’s daily
net assets.
|
|
|
|
|
|
|
Fund Name |
|
Daily
Net Assets
of the Fund |
|
Contractual
Management Fee (%)
(annual
rate) |
|
Janus
Henderson AAA CLO ETF |
|
$0 - $1 billion
over $1 billion |
|
|
0.25
0.20 |
|
For
the fiscal period ended October 31, 2021, the aggregate fee paid to the
Adviser, as a percentage of average net assets, was 0.25%. A discussion
regarding the basis for the Trustees’ approval of the Fund’s investment advisory
agreement is included in the Fund’s annual report (for the period ending October
31) or semiannual report (for the period ending April 30) to shareholders. You
can request the Fund’s annual or semiannual reports (as they become available),
free of charge, by contacting your broker-dealer, plan sponsor, or financial
intermediary, or by contacting a representative at 800‑668‑0434. The reports are
also available, free of charge, at janushenderson.com/info.
22½Janus Detroit Street Trust
Expense
Limitation
The
Adviser has contractually agreed to waive and/or reimburse a portion of the
Fund’s management fee in an amount equal to the management fee it earns as an
investment adviser to any affiliated ETFs in which the Fund invests. Pursuant to
this agreement, the waiver amount is equal to the amount of Fund assets invested
in the affiliated ETF, multiplied by an amount equal to the current daily
unitary management fee of the affiliated ETF less certain asset-based operating
fees and expenses incurred on a per‑fund basis and paid by the Adviser with
respect to the affiliated ETF (including, but not limited to custody,
sub‑administration and transfer agency fees). The fee waiver agreement will
remain in effect at least through February 28, 2023. The Adviser may not
recover amounts previously waived or reimbursed that are related to investments
in affiliated ETFs. The fee waiver agreement may be modified or terminated prior
to this date only at the discretion of the Board of Trustees.
Janus
Henderson AAA CLO ETF
Co‑Portfolio
Managers John Kerschner and Nick Childs jointly are responsible for the
day‑to‑day management of the Fund, with no limitation on the authority of any
co‑portfolio manager in relation to the others.
John
Kerschner, CFA, is Co‑Portfolio Manager of the Fund,
which he has managed since inception. He joined the Adviser in December 2010.
Mr. Kerschner holds a Bachelor of Arts degree (cum laude) in Biology from
Yale University and a Master of Business Administration degree from the Fuqua
School of Finance at Duke University, where he was designated a Fuqua Scholar.
Mr. Kerschner holds the Chartered Financial Analyst designation.
Nick Childs,
CFA, is Co‑Portfolio Manager of the Fund, which he has managed
since inception. He joined the Adviser in 2017. Prior to joining the Adviser, he
was a portfolio manager at Proprietary Capital, LLC from 2012 to 2016, where he
managed alternative fixed income strategies specializing in mortgage-backed
securities, absolute return investing. Mr. Childs holds a Bachelor of
Science degree from the University of Denver. Mr. Childs holds the
Chartered Financial Analyst designation.
Information
about the portfolio managers’ compensation structure and other accounts managed
is included in the SAI.
Conflicts
of Interest
The
Adviser manages many funds and numerous other accounts, which may include
separate accounts and other pooled investment vehicles, such as hedge funds.
Side‑by‑side management of multiple accounts, including the management of a cash
collateral pool for securities lending and investing the Janus Henderson funds’
cash, may give rise to conflicts of interest among those accounts, and may
create potential risks, such as the risk that investment activity in one account
may adversely affect another account. For example, short sale activity in an
account could adversely affect the market value of long positions in one or more
other accounts (and vice versa). Side‑by‑side management may raise additional
potential conflicts of interest relating to the allocation of investment
opportunities and the aggregation and allocation of trades.
In
addition, from time to time, the Adviser or its affiliates may, subject to
compliance with applicable law, purchase and hold shares of the Fund for their
own accounts, or may purchase shares of the Fund for the benefit of their
clients, including other Janus Henderson funds. Increasing the Fund’s assets may
enhance the Fund’s profile with financial intermediaries and platforms,
investment flexibility and trading volume. The Adviser and its affiliates
reserve the right, subject to compliance with applicable law, to dispose of at
any time some or all of the shares of the Fund acquired for their own accounts
or for the benefit of their clients. A large sale of Fund shares by the Adviser
or its affiliates could significantly reduce the asset size of the Fund, which
might have an adverse effect on the Fund’s investment flexibility or trading
volume. The Adviser considers the effect of redemptions on the Fund and other
shareholders in deciding whether to dispose of its shares of the Fund.
The
Adviser believes it has appropriately designed and implemented policies and
procedures to mitigate these and other potential conflicts of interest. A
further discussion of potential conflicts of interest and policies and
procedures intended to mitigate them is contained in the Fund’s SAI.
23½Janus Detroit Street Trust
OTHER
INFORMATION
Creation
Units for the Fund are distributed by ALPS Distributors, Inc. (the
“Distributor”), which is a member of the Financial Industry Regulatory
Authority, Inc. (“FINRA”). To obtain information about FINRA member firms and
their associated persons, you may contact FINRA at www.finra.org, or
1‑800‑289‑9999.
24½Janus Detroit Street Trust
DIVIDENDS,
DISTRIBUTIONS AND TAXES
To
avoid taxation of the Fund, the Internal Revenue Code of 1986, as amended (the
“Internal Revenue Code”), requires the Fund to distribute all or substantially
all of its net investment income and any net capital gains realized on its
investments at least annually.
Distribution
Schedule
Dividends
from net investment income are generally declared and distributed to
shareholders monthly. Distributions of net capital gains are declared and
distributed at least annually. Dividends may be declared and paid more
frequently to comply with the distribution requirements of the Internal Revenue
Code. The date you receive your distribution may vary depending on how your
intermediary processes trades. Dividend payments are made through Depository
Trust Company (“DTC”) participants and indirect participants to beneficial
owners then of record with proceeds received from the Fund. Please consult your financial intermediary for
details.
How
Distributions Affect the Fund’s NAV
Distributions
are paid to shareholders as of the record date of a distribution of the Fund,
regardless of how long the shares have been held. Undistributed income and net
capital gains are included in the Fund’s daily NAV. The Fund’s NAV drops by the
amount of the distribution, net of any subsequent market fluctuations. For
example, assume that on December 31, the Fund declared a dividend in the
amount of $0.25 per share. If the Fund’s NAV was $10.00 on December 30, the
Fund’s NAV on December 31 would be $9.75, barring market fluctuations. You
should be aware that distributions from a taxable fund do not increase the value
of your investment and may create income tax obligations.
No
dividend reinvestment service is provided by the Trust. Financial intermediaries
may make available the DTC book-entry Dividend Reinvestment Service for use by
beneficial owners of Fund shares for reinvestment of their dividend
distributions. Beneficial owners should contact their financial intermediary to
determine the availability and costs of the service and the details of
participation therein. Financial intermediaries may require beneficial owners to
adhere to specific procedures and timetables. If this service is available and
used, dividend distributions of both income and net capital gains will be
automatically reinvested in additional whole shares of the Fund purchased in the
secondary market.
As
with any investment, you should consider the tax consequences of investing in
the Fund. The following is a general discussion of certain federal income tax
consequences of investing in the Fund. The discussion does not apply to
qualified tax‑advantaged accounts or other non‑taxable entities, nor is it a
complete analysis of the federal income tax implications of investing in the
Fund. You should consult your tax adviser regarding the effect that an
investment in the Fund may have on your particular tax situation, including the
federal, state, local, and foreign tax consequences of your investment.
Taxes
on Distributions
Distributions
by the Fund are subject to federal income tax, regardless of whether the
distribution is made in cash or reinvested in additional shares of the Fund.
Distributions from net investment income (which includes dividends, interest,
and realized net short-term capital gains), other than qualified dividend
income, are taxable to shareholders as ordinary income. Distributions of
qualified dividend income are taxed to individuals and other noncorporate
shareholders at long-term capital gain rates, provided certain holding period
and other requirements are satisfied. Dividends received from REITs, certain
foreign corporations and income received “in lieu of” dividends in a securities
lending transaction generally will not constitute qualified dividend income.
Because the income of the Fund is primarily derived from investments earning
interest rather than dividend income, generally none or only a small portion of
the income dividends paid by the Fund is anticipated to be qualified dividend
income. Distributions of net capital gain (i.e., the excess of net long-term
capital gain over net short-term capital loss) are taxable as long-term capital
gain, regardless of how long a shareholder has held Fund shares. Individuals,
trusts, and estates whose income exceeds certain threshold amounts are subject
to an additional 3.8% Medicare contribution tax on net investment income. Net
investment income includes dividends paid by the Fund and capital gains from any
sale or exchange of Fund shares. The Fund’s net investment income and capital
gains are distributed to (and may be taxable to) those persons who are
shareholders of the Fund at the record date of such payments. Although the
Fund’s total net income and net realized gain are the results of its operations,
the per share amount distributed or taxable to shareholders is affected by the
number of Fund shares outstanding at the record date. Distributions declared to
shareholders of record in October, November, or December and paid on or before
January 31 of the succeeding year will be treated for federal income tax
purposes as if received by shareholders on December 31 of the year in which
the distribution was declared. Generally, account tax information will be made
available to shareholders on or before February 15 of each year.
Information regarding distributions may also be reported to the Internal Revenue
Service. (“IRS”).
25½Janus Detroit Street Trust
Taxes
on Sales
Any
time you sell the shares of the Fund in a taxable account, it is considered a
taxable event. Depending on the purchase price and the sale price, you may have
a gain or loss on the transaction. The gain or loss will generally be treated as
a long-term capital gain or loss if you held your shares for more than one year
and if not held for such period, as a short-term capital gain or loss. Any tax
liabilities generated by your transactions are your responsibility.
U.S.
federal income tax withholding may be required on all distributions payable to
shareholders who fail to provide their correct taxpayer identification number,
fail to make certain required certifications, or who have been notified by the
IRS that they are subject to backup withholding. The current backup withholding
rate is applied.
For
shares purchased and sold from a taxable account, your intermediary will report
cost basis information to you and to the IRS. Your financial intermediary will
permit shareholders to elect their preferred cost basis method. In the absence
of an election, your cost basis method will be your financial intermediary’s
default method, which is often the average cost method. Please consult your tax
adviser to determine the appropriate cost basis method for your particular tax
situation and to learn more about how the cost basis reporting laws apply to you
and your investments.
Taxation
of the Fund
Dividends,
interest, and some capital gains received by the Fund on foreign securities may
be subject to foreign tax withholding or other foreign taxes.
Certain
fund transactions may involve futures, options, swap agreements, hedged
investments, and other similar transactions, and may be subject to special
provisions of the Internal Revenue Code that, among other things, can
potentially affect the character, amount, and timing of distributions to
shareholders, and utilization of capital loss carryforwards. The Fund will
monitor its transactions and may make certain tax elections and use certain
investment strategies where applicable in order to mitigate the effect of these
tax provisions, if possible.
The
Fund does not expect to pay any federal income or excise taxes because it
intends to meet certain requirements of the Internal Revenue Code, including the
distribution each year of substantially all its net investment income and net
capital gains. It is important for the Fund to meet these requirements so that
any earnings on your investment will not be subject to federal income taxes
twice. If the Fund invests in a partnership, however, it may be subject to state
tax liabilities.
If
the Fund redeems Creation Units in cash, it may recognize more capital gains
than it will if it redeems Creation Units in‑kind.
For additional information, see the “Taxation”
section of the Statement of Additional Information.
26½Janus Detroit Street Trust
SHAREHOLDER’S
GUIDE
The
Fund issues or redeems its shares at NAV per share only in Creation Units.
Shares of the Fund are listed for trading on a national securities exchange and
trade on the secondary market during the trading day. Shares can be bought and
sold throughout the trading day like shares of other publicly traded companies.
There is no minimum investment. When buying or selling Fund shares through a
broker, you will incur customary brokerage commissions and charges, and you may
pay some or all of the spread between the bid and offered price in the secondary
market on each purchase and sale transaction. Fund shares are traded on NYSE
Arca under the trading symbol JAAA. Share prices are reported in dollars and
cents per share.
APs
may acquire Fund shares directly from the Fund, and APs may tender their Fund
shares for redemption directly to the Fund, at NAV per share, only in Creation
Units and in accordance with the procedures described in the SAI.
The
per share NAV of the Fund is computed by dividing the total value of the Fund’s
portfolio, less any liabilities, by the total number of outstanding shares of
the Fund. The Fund’s NAV is calculated as of the close of the regular trading
session of the New York Stock Exchange (“NYSE”) (normally 4:00 p.m. New York
time) each day that the NYSE is open (“Business Day”). However, the NAV may
still be calculated if trading on the NYSE is restricted, provided there is
sufficient pricing information available for the Fund to value its securities,
or as permitted by the SEC. Foreign securities held by the Fund, as applicable,
may be traded on days and at times when the NYSE is closed and the NAV is
therefore not calculated. Accordingly, the value of the Fund’s holdings may
change on days that are not Business Days in the United States and on which you
will not be able to purchase or sell the Fund’s shares.
Securities
held by the Fund are valued in accordance with policies and procedures
established by and under the supervision of the Trustees. To the extent
available, equity securities (including exchange-traded funds) are generally
valued on the basis of market quotations. Most fixed-income securities are
typically valued using an evaluated bid price supplied by an approved pricing
service that is intended to reflect market value. The evaluated bid price is an
evaluation that may consider factors such as security prices, yields,
maturities, and ratings. Certain short-term instruments maturing within 60 days
or less may be valued at amortized cost, which approximates market value. If a
market quotation or evaluated price for a security is not readily available or
is deemed unreliable, or if an event that is expected to affect the value of the
security occurs after the close of the principal exchange or market on which the
security is traded, and before the close of the NYSE, a fair value of the
security will be determined in good faith under the policies and procedures.
Such events include, but are not limited to: (i) a significant event that
may affect the securities of a single issuer, such as a merger, bankruptcy, or
significant issuer-specific development; (ii) an event that may affect an
entire market, such as a natural disaster or significant governmental action;
(iii) a non‑significant event such as a market closing early or not
opening, or a security trading halt; and (iv) pricing of a non‑valued
security and a restricted or non‑public security. This type of fair value
pricing may be more commonly used with foreign equity securities, but it may
also be used with, among other things, thinly-traded domestic securities or
fixed-income securities. Special valuation considerations may apply with respect
to “odd‑lot” fixed-income transactions which, due to their small size, may
receive evaluated prices by pricing services which reflect a large block trade
and not what actually could be obtained for the odd‑lot position. For valuation
purposes, if applicable, quotations of foreign portfolio securities, other
assets and liabilities, and forward contracts stated in foreign currency are
generally translated into U.S. dollar equivalents at the prevailing market
rates.
The
value of the securities of open‑end mutual funds held by the Fund, if any, will
be calculated using the NAV of such open‑end mutual funds, and the prospectuses
for such open‑end mutual funds explain the circumstances under which they use
fair value pricing and the effects of using fair value pricing.
All
purchases, sales, or other account activity must be processed through your
financial intermediary or plan sponsor.
|
DISTRIBUTION AND SERVICING FEES |
Distribution
and Shareholder Servicing Plan
The
Trust has adopted a Distribution and Servicing Plan for shares of the Fund
pursuant to Rule 12b‑1 under the 1940 Act (the “Plan”). The Plan permits
compensation in connection with the distribution and marketing of Fund shares
and/or the provision of certain shareholder services. The Plan permits the Fund
to pay the Distributor, or its designee, a fee for the sale and distribution
and/or shareholder servicing of the shares at an annual rate of up to 0.25% of
average daily net assets of the shares of the Fund (“12b‑1 fee”). However,
payment of a 12b‑1 fee has not been authorized at this time.
27½Janus Detroit Street Trust
Under
the terms of the Plan, the Trust is authorized to make payments to the
Distributor or its designee for remittance to retirement plan service providers,
broker-dealers, bank trust departments, financial advisors, and other financial
intermediaries, as compensation for distribution and/or shareholder services
performed by such entities for their customers who are investors in the
Fund.
The
12b‑1 fee may only be imposed or increased when the Trustees determine that it
is in the best interests of shareholders to do so. Because these fees are paid
out of the Fund’s assets on an ongoing basis, to the extent that a fee is
authorized and payments are made, over time they will increase the cost of an
investment in the Fund. The 12b‑1 fee may cost an investor more than other types
of sales charges.
|
PAYMENTS TO FINANCIAL INTERMEDIARIES BY ADVISER OR ITS AFFILIATES |
From
their own assets, the Adviser or its affiliates pay selected brokerage firms or
other financial intermediaries for making certain funds available to their
clients or otherwise distributing, promoting or marketing the funds. The Adviser
or its affiliates also make payments to one or more intermediaries for
information about transactions and holdings in the funds, such as the amount of
fund shares purchased, sold or held through the intermediary and or its
salespersons, the intermediary platform(s) on which shares are transacted and
other information related to the funds. Payments made by the Adviser and its
affiliates may eliminate or reduce trading commissions that the intermediary
would otherwise charge its customers or its salespersons in connection with the
purchase or sale of certain funds. Payment by the Adviser or its affiliates to
eliminate or reduce a trading commission creates an incentive for salespersons
of the intermediary to sell the Janus Henderson funds over other funds for which
a commission would be charged. The amount of these payments is determined from
time to time by the Adviser, may be substantial, and may differ for different
intermediaries. The Adviser may determine to make payments based on any number
of factors or metrics. For example, the Adviser may make payments at year‑end
and/or other intervals in a fixed amount, an amount based upon an intermediary’s
services at defined levels, an amount based upon the total assets represented by
funds subject to arrangements with the intermediary, or an amount based on the
intermediary’s net sales of one or more funds in a year or other period, any of
which arrangements may include an agreed-upon minimum or maximum payment, or any
combination of the foregoing. Payments based primarily on sales create an
incentive to make new sales of shares, while payments based on assets create an
incentive to retain previously sold shares. The Adviser currently maintains
asset-based agreements with certain intermediaries on behalf of the Trust. The
amount of compensation paid by the Adviser varies from intermediary to
intermediary. More information regarding these payments is contained in the
SAI.
With
respect to non‑exchange‑traded Janus Henderson funds not offered in this
Prospectus, the Adviser or its affiliates pay fees, from their own assets, to
selected brokerage firms, banks, financial advisors, retirement plan service
providers, and other financial intermediaries that sell the Janus Henderson
funds for distribution, marketing, promotional, or related services, and/or for
providing recordkeeping, subaccounting, transaction processing, and other
shareholder or administrative services (including payments for processing
transactions via National Securities Clearing Corporation (“NSCC”) or other
means) in connection with investments in the Janus Henderson funds. These fees
are in addition to any fees that may be paid by the Janus Henderson funds for
certain of these types of services or other services. Shareholders investing
through an intermediary should consider whether such arrangements exist when
evaluating any recommendations from an intermediary.
In
addition, the Adviser or its affiliates may also share certain marketing
expenses with intermediaries, or pay for or sponsor informational meetings,
seminars, client awareness events, and support for marketing materials, sales
reporting, or business building programs for such intermediaries to raise
awareness of the Janus Henderson funds. The Adviser or its affiliates make
payments to participate in intermediary marketing support programs which may
provide the Adviser or its affiliates with one or more of the following
benefits: attendance at sales conferences, participation in meetings or training
sessions, access to or information about intermediary personnel, use of an
intermediary’s marketing and communication infrastructure, fund analysis tools,
data, business planning and strategy sessions with intermediary personnel,
information on industry- or platform-specific developments, trends and service
providers, and other marketing-related services. Such payments may be in
addition to, or in lieu of, the payments described above. These payments are
intended to promote the sales of Janus Henderson funds and to reimburse
financial intermediaries, directly or indirectly, for the costs that they or
their salespersons incur in connection with educational seminars, meetings, and
training efforts about the Janus Henderson funds to enable the intermediaries
and their salespersons to make suitable recommendations, provide useful
services, and maintain the necessary infrastructure to make the Janus Henderson
funds available to their customers.
28½Janus Detroit Street Trust
The
receipt of (or prospect of receiving) payments, reimbursements and other forms
of compensation described above may provide a financial intermediary and its
salespersons with an incentive to favor sales of Janus Henderson funds’ shares
over sales of other funds (or non‑mutual fund investments), with respect to
which the financial intermediary does not receive such payments or receives them
in a lower amount. The receipt of these payments may cause certain financial
intermediaries to elevate the prominence of the Janus Henderson funds within
such financial intermediary’s organization by, for example, placement on a list
of preferred or recommended funds and/or the provision of preferential or
enhanced opportunities to promote the Janus Henderson funds in various ways
within such financial intermediary’s organization.
From
time to time, certain financial intermediaries approach the Adviser to request
that the Adviser make contributions to certain charitable organizations. In
these cases, the Adviser’s contribution may result in the financial
intermediary, or its salespersons, recommending Janus Henderson funds over other
funds (or non‑mutual fund investments).
The
payment arrangements described above will not change the price an investor pays
for shares nor the amount that a Janus Henderson fund receives to invest on
behalf of the investor. You should consider whether such arrangements exist when
evaluating any recommendations from an intermediary to purchase or sell shares
of the Fund. Please contact your financial intermediary or plan sponsor for
details on such arrangements.
|
PURCHASING AND SELLING SHARES |
Shares
of the Fund are listed for trading on a national securities exchange during the
trading day. Shares can be bought and sold throughout the trading day like
shares of other publicly traded companies. However, there can be no guarantee
that an active trading market will develop or be maintained, or that the Fund
shares listing will continue or remain unchanged. The Fund does not impose any
minimum investment for shares of the Fund purchased on an exchange. Buying or
selling the Fund’s shares involves certain costs that apply to all securities
transactions. When buying or selling shares of the Fund through a financial
intermediary, you may incur a brokerage commission or other charges determined
by your financial intermediary. Due to these brokerage costs, if any, frequent
trading may detract significantly from investment returns. In addition, you may
also incur the cost of the spread (the difference between the bid price and the
ask price). The commission is frequently a fixed amount and may be a significant
cost for investors seeking to buy or sell small amounts of shares.
Shares
of the Fund may be acquired through the Distributor or redeemed directly with
the Fund only in Creation Units or multiples thereof, as discussed in the
“Creation and Redemption of Creation Units” section of the SAI. Once created,
shares of the Fund generally trade in the secondary market in amounts less than
a Creation Unit.
The
Fund’s primary listing exchange is NYSE Arca. The NYSE Arca is open for trading
Monday through Friday and is closed on the following holidays: New Year’s Day,
Martin Luther King, Jr. Day, Presidents’ Day, Good Friday, Memorial Day,
Juneteenth, Independence Day, Labor Day, Thanksgiving Day and Christmas
Day.
A
Business Day with respect to the Fund is each day NYSE Arca is open. Orders from
APs to create or redeem Creation Units will only be accepted on a Business Day.
On days when the NYSE Arca or bond markets close earlier than normal (or on days
when the bond markets are closed but the NYSE Arca is open), the Fund may
require orders to create or redeem Creation Units to be placed earlier in the
day. In addition, to minimize brokerage and other related trading costs
associated with securities that cannot be readily transferred in‑kind, the Fund
may establish early trade cut‑off times for APs to submit orders for Creation
Units, in accordance with the 1940 Act. See the SAI for more information.
In
compliance with the Uniting and Strengthening America by Providing Appropriate
Tools Required to Intercept and Obstruct Terrorism Act of 2001 (“USA PATRIOT
Act”), your financial intermediary is required to verify certain information on
your account application as part of its Anti-Money Laundering Program. You will
be required to provide your full name, date of birth, social security number,
and permanent street address to assist in verifying your identity. You may also
be asked to provide additional documents that may help to establish your
identity. Until verification of your identity is made, your financial
intermediary may temporarily limit additional share purchases. In addition, your
financial intermediary may close an account if it is unable to verify your
identity. Please contact your financial intermediary if you need additional
assistance when completing your application or additional information about your
financial intermediary’s Anti-Money Laundering Program.
In
an effort to ensure compliance with this law, the Adviser’s Anti-Money
Laundering Program (the “Program”) provides for the development of internal
practices, procedures and controls, designation of anti-money laundering
compliance officers, an ongoing training program, and an independent audit
function to determine the effectiveness of the Program.
29½Janus Detroit Street Trust
Continuous
Offering
The
method by which Creation Units of shares are created and traded may raise
certain issues under applicable securities laws. Because new Creation Units of
shares are issued and sold by the Fund on an ongoing basis, a “distribution,” as
such term is used in the Securities Act, may occur at any point. Broker-dealers
and other persons are cautioned that some activities on their part may,
depending on the circumstances, result in their being deemed participants in a
distribution in a manner which could render them statutory underwriters and
subject them to the prospectus delivery requirements and liability provisions of
the Securities Act. For example, a broker-dealer firm or its client may be
deemed a statutory underwriter if it takes Creation Units after placing an order
with the Distributor, breaks them down into constituent shares and sells the
shares directly to customers or if it chooses to couple the creation of a supply
of new shares with an active selling effort involving solicitation of secondary
market demand for shares. A determination of whether one is an underwriter for
purposes of the Securities Act must take into account all the facts and
circumstances pertaining to the activities of the broker-dealer or its client in
the particular case, and the examples mentioned above should not be considered a
complete description of all the activities that could lead to a characterization
as an underwriter.
Broker-dealer
firms should also note that dealers who are not “underwriters” but are effecting
transactions in shares, whether or not participating in the distribution of
shares, are generally required to deliver a prospectus. This is because the
prospectus delivery exemption in Section 4(a)(3)(C) of the Securities Act
is not available in respect of such transactions as a result of
Section 24(d) of the 1940 Act. As a result, broker-dealer firms should note
that dealers who are not “underwriters” but are participating in a distribution
(as contrasted with engaging in ordinary secondary market transactions) and thus
dealing with the shares that are part of an unsold allotment within the meaning
of Section 4(a)(3)(C) of the Securities Act, will be unable to take
advantage of the prospectus delivery exemption provided by Section 4(a)(3)
of the Securities Act. For delivery of prospectuses to exchange members, the
prospectus delivery mechanism of Rule 153 under the Securities Act is only
available with respect to transactions on a national exchange.
Book
Entry
Shares
of the Fund are held in book-entry form, which means that no stock certificates
are issued. The DTC or its nominee is the record owner of all outstanding shares
of the Fund and is recognized as the owner of all shares for all purposes.
Investors
owning shares of the Fund are beneficial owners as shown on the records of DTC
or its participants. DTC serves as the securities depository for shares of the
Fund. DTC participants include securities brokers and dealers, banks, trust
companies, clearing corporations and other institutions that directly or
indirectly maintain a custodial relationship with DTC. As a beneficial owner of
shares, you are not entitled to receive physical delivery of stock certificates
or to have shares registered in your name, and you are not considered a
registered owner of shares. Therefore, to exercise any right as an owner of
shares, you must rely upon the procedures of DTC and its participants. These
procedures are the same as those that apply to any other exchange-traded
securities that you hold in book-entry or “street name” form.
Premiums
and Discounts
There
may be differences between the daily market prices on secondary markets for
shares of the Fund and the Fund’s NAV. NAV is the price per share at which the
Fund issues and redeems shares. See “Pricing of Fund Shares” above. The price
used to calculate market returns (“Market Price”) of the Fund generally is
determined using the midpoint between the highest bid and the lowest offer on
the national securities exchange on which shares of the Fund are primarily
listed for trading, as of the time that the Fund’s NAV is calculated. The Fund’s
Market Price may be at, above, or below its NAV. The NAV of the Fund will
fluctuate with changes in the market value of its portfolio holdings. The Market
Price of the Fund will fluctuate in accordance with changes in its NAV, as well
as market supply and demand.
Premiums
or discounts are the differences (expressed as a percentage) between the NAV and
the Market Price of the Fund on a given day, generally at the time the NAV is
calculated. A premium is the amount that the Fund is trading above the reported
NAV, expressed as a percentage of the NAV. A discount is the amount that the
Fund is trading below the reported NAV, expressed as a percentage of the NAV. A
discount or premium could be significant. Information regarding the Fund’s
premium/discount to NAV for the most recently completed calendar year and the
most recently completed calendar quarters since that year end (or the life of
the Fund, if shorter) is available at janushenderson.com/performance by
selecting the Fund for additional details.
Bid/Ask
Spread
Investors
purchasing or selling shares of the Fund in the secondary market may incur costs
attributable to the difference between the highest price a buyer is willing to
pay to purchase shares of the Fund (the “bid”) and the lowest price a seller
is
30½Janus Detroit Street Trust
willing
to accept for shares of the Fund (the “ask”). The spread varies over time for
shares of the Fund based on its trading volume and market liquidity, and is
generally less if the Fund has more trading volume and market liquidity and more
if the Fund has less trading volume and market liquidity. Historical information
regarding the Fund’s spread over various periods of time can be accessed at
janushenderson.com/performance by selecting the Fund for additional
details.
Investments
by Other Investment Companies
The
Trust and the Fund are part of the Janus Henderson family of funds and are
related for purposes of investor and investment services, as defined in
Section 12(d)(1)(G) of the 1940 Act.
For
purposes of the 1940 Act, Fund shares are issued by a registered investment
company and purchases of Fund shares by registered investment companies and
companies relying on Section 3(c)(1) or 3(c)(7) of the 1940 Act are subject
to the restrictions set forth in Section 12(d)(1) of the 1940 Act. Rule
12d1‑4 under the 1940 Act permits registered investment companies to invest in
Fund shares beyond the limits in Section 12(d)(1)(A), subject to certain
terms and conditions, including that the registered investment company first
enter into a written agreement with the Trust regarding the terms of the
investment.
Unlike
traditional mutual funds, the frequent trading of Fund shares generally does not
disrupt portfolio management, increase the Fund’s trading costs, lead to
realization of capital gains by the Fund, or otherwise harm Fund shareholders.
The vast majority of trading in Fund shares occurs on the secondary market.
Because these trades do not involve the Fund, they do not harm the Fund or its
shareholders. A few institutional investors, referred to as Authorized
Participants, are authorized to purchase and redeem Fund shares directly with
the Fund. Most ETFs typically effect these trades in kind (i.e., for securities
and not for cash), and therefore they do not cause any of the harmful effects to
the issuing fund (as previously noted) that may result from frequent cash
trades. While the Fund typically redeems its shares on an in‑kind basis, the
Fund generally issues Creation Units in exchange for cash, thereby potentially
subjecting the Fund and its shareholders to those harmful effects. As a result,
the Fund requires Authorized Participants to pay transaction fees to cover
brokerage and certain related costs when purchasing or redeeming Creation Units.
Those fees are designed to protect the Fund and its shareholders from the
dilutive costs associated with frequent creation and redemption activity. For
these reasons, the Trustees of the Fund have determined that it is not necessary
to adopt policies and procedures to detect and deter frequent trading and market
timing of Fund shares. However, the Fund’s policies and procedures regarding
frequent purchases and redemptions may be modified by the Trustees at any
time.
|
FUND WEBSITE & AVAILABILITY OF PORTFOLIO HOLDINGS INFORMATION |
Each
Business Day, the Fund’s portfolio holdings information is provided by its
custodian or other agent for dissemination through the facilities of the NSCC
and/or other fee‑based subscription services to NSCC members and/or subscribers
to entities that publish and/or analyze such information in connection with the
process of purchasing or redeeming Creation Units or trading shares of the Fund
in the secondary market. In addition, on each Business Day before commencement
of trading in shares on the NYSE Arca, the Fund will disclose on
janushenderson.com/info the identities and quantities of each portfolio position
held by the Fund that will form the basis for the Fund’s next calculation of the
NAV. The Fund is also required to disclose its complete holdings as an exhibit
to its reports on Form N‑PORT within 60 days of the end of the first and third
fiscal quarters, and in the annual report and semiannual report to Fund
shareholders.
For
additional information on these disclosures and the availability of portfolio
holdings information, please refer to the Fund’s SAI.
|
SHAREHOLDER COMMUNICATIONS |
Statements
and Reports
Your
financial intermediary or plan sponsor is responsible for sending you periodic
statements of all transactions, along with trade confirmations and tax
reporting, as required by applicable law.
Your
financial intermediary or plan sponsor is responsible for providing annual and
semiannual reports, including the financial statements of the Fund. These
reports show the Fund’s investments and the market value of such investments, as
well as other information about the Fund and its operations. Please contact your
financial intermediary or plan sponsor to obtain these reports. The Fund’s
fiscal year ends October 31.
31½Janus Detroit Street Trust
Lost
(Unclaimed/Abandoned) Accounts
It
is important to maintain a correct address for each shareholder. An incorrect
address may cause a shareholder’s account statements and other mailings to be
returned as undeliverable. Based upon statutory requirements for returned mail,
your financial intermediary or plan sponsor is required to attempt to locate the
shareholder or rightful owner of the account. If the financial intermediary or
plan sponsor is unable to locate the shareholder, then the financial
intermediary or plan sponsor is legally obligated to deem the property
“unclaimed” or “abandoned,” and subsequently escheat (or transfer) unclaimed
property (including shares of a fund) to the appropriate state’s unclaimed
property administrator in accordance with statutory requirements. Further, your
account may be deemed “unclaimed” or “abandoned,” and subsequently transferred
to your state of residence if no activity (as defined by that state) occurs
within your account during the time frame specified in your state’s unclaimed
property laws. The shareholder’s last known address of record determines which
state has jurisdiction. Interest or income is not earned on redemption or
distribution check(s) sent to you during the time the check(s) remained
uncashed.
32½Janus Detroit Street Trust
FINANCIAL HIGHLIGHTS
The
financial highlights table is intended to help you understand the Fund’s
financial performance for each fiscal period shown. Items “Net asset value,
beginning of period” through “Net asset value, end of period” reflect financial
results for a single Fund share. The information for the fiscal periods has been
audited by PricewaterhouseCoopers LLP, whose report, along with the Fund’s
financial statements, is included in the Annual Report, which is available upon
request, and incorporated by reference into the SAI.
The
total returns in the table represent the rate that an investor would have earned
(or lost) on an investment in the Fund (assuming reinvestment of all dividends
and distributions).
|
|
|
|
|
|
|
|
|
For a
share outstanding during each period ended October 31 |
|
2021 |
|
|
2020(1) |
|
Net
Asset Value, Beginning of Period |
|
|
$49.79 |
|
|
|
$50.00 |
|
Income/(Loss) from Investment
Operations: |
|
|
|
|
|
|
|
|
Net
investment income/(loss)(2) |
|
|
0.58 |
|
|
|
0.02 |
|
Net
realized and unrealized gain/(loss) |
|
|
0.69 |
|
|
|
(0.23) |
|
Total
from Investment Operations |
|
|
1.27 |
|
|
|
(0.21) |
|
Less Dividends
and Distributions: |
|
|
|
|
|
|
|
|
Dividends
(from net investment income) |
|
|
(0.57) |
|
|
|
— |
|
Total
Dividends and Distributions |
|
|
(0.57) |
|
|
|
— |
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
|
|
$50.49 |
|
|
|
$49.79 |
|
|
|
|
|
|
|
|
Total
Return* |
|
|
2.55% |
|
|
|
(0.42)% |
|
Net
assets, End of Period (in thousands) |
|
|
$260,002 |
|
|
|
$119,486 |
|
Average
Net Assets for the Period (in thousands) |
|
|
$146,235 |
|
|
|
$95,755 |
|
Ratios
to Average Net Assets** |
|
|
|
|
|
|
|
|
Ratio
of Gross Expenses |
|
|
0.25% |
|
|
|
0.25% |
|
Ratio
of Net Investment Income/(Loss) |
|
|
1.16% |
|
|
|
1.29% |
|
Portfolio
Turnover Rate(3) |
|
|
42% |
|
|
|
0% |
|
* |
Total
return not annualized for periods of less than one full
year. |
** |
Annualized
for periods of less than one full year. |
(1) |
Period
from October 16, 2020 (commencement of operations) through
October 31, 2020. |
(2) |
Per
share amounts are calculated based on average shares outstanding during
the year or period. |
(3) |
Portfolio
turnover rate excludes securities received or delivered from in‑kind
processing of creation or redemptions. |
(4) |
Amount
is less than 0.5% |
33½Janus Detroit Street Trust
GLOSSARY
OF INVESTMENT TERMS
This
glossary provides a more detailed description of some of the types of
securities, investment strategies, and other instruments in which the Fund may
invest, as well as some general investment terms. The Fund may invest in these
instruments to the extent permitted by its investment objective and policies.
The Fund is not limited by this discussion and may invest in any other types of
instruments not precluded by the policies discussed elsewhere in this
Prospectus.
Average-Weighted
Effective Maturity is a measure of a bond’s maturity. The stated
maturity of a bond is the date when the issuer must repay the bond’s entire
principal value to an investor. Some types of bonds may also have an “effective
maturity” that is shorter than the stated date due to prepayment or call
provisions. Securities without prepayment or call provisions generally have an
effective maturity equal to their stated maturity. Average-weighted effective
maturity is calculated by averaging the effective maturity of bonds held by the
Fund with each effective maturity “weighted” according to the percentage of net
assets that it represents.
Bonds
are debt securities issued by a company, municipality, government,
or government agency. The issuer of a bond is required to pay the holder the
amount of the loan (or par value of the bond) at a specified maturity and to
make scheduled interest payments.
Collateralized Loan
Obligations (CLOs) are floating- or fixed-rate securities issued
in different tranches with varying degrees of risk by a trust or other special
purpose vehicle and backed by an underlying portfolio consisting primarily of
below investment grade corporate loans. Such loans may include domestic and
foreign senior secured loans, senior unsecured loans and subordinate corporate
loans, some of which may individually be below investment grade or the
equivalent if unrated.
Commercial paper
is a short-term debt obligation with a maturity ranging from 1 to
270 days issued by banks, corporations, and other borrowers to investors seeking
to invest idle cash. The Fund may purchase commercial paper issued in private
placements under Section 4(2) of the Securities Act of 1933, as amended
(the “Securities Act”).
Covenant Lite Loans
are loans which have few or no financial maintenance covenants.
Although loan investments are generally subject to certain restrictive covenants
in favor of the investor, certain of the underlying loans of a CLO in which the
Fund may invest may be issued or offered as “covenant lite” loans. “Financial
maintenance covenants” are those that require a borrower to maintain certain
financial metrics during the life of the loan, such as maintaining certain
levels of cash flow or limiting leverage. In the event of financial
deterioration on the part of the borrower, these covenants are included to
permit the lenders to renegotiate the terms of the loan, such as increasing the
borrowing costs to the borrower, or to take other actions which would improve
the position of the lender.
Debt securities
are securities representing money borrowed that must be repaid at
a later date. Such securities have specific maturities and usually a specific
rate of interest or an original purchase discount.
Duration
is a measurement of price sensitivity to interest rate changes.
Unlike average maturity, duration reflects both principal and interest payments.
Generally, the higher the coupon rate on a bond, the lower its duration will be.
The duration of a bond portfolio is calculated by averaging the duration of
bonds held by the Fund with each duration “weighted” according to the percentage
of net assets that it represents. Because duration accounts for interest
payments, the Fund’s duration is usually shorter than its average maturity.
Securities with longer durations tend to be more sensitive to changes in
interest rates, and are usually more volatile than securities with shorter
duration. For example, the price of a bond portfolio with an average duration of
five years would be expected to fall approximately 5% if interest rates rose by
one percentage point. The Fund with a longer portfolio duration is more likely
to experience a decrease in its share price as interest rates rise.
Fixed-income
securities are securities that pay a specified rate of return. The
term generally includes short- and long-term government, corporate, and
municipal obligations that pay a specified rate of interest, dividends, or
coupons for a specified period of time. Coupon and dividend rates may be fixed
for the life of the issue or, in the case of adjustable and floating rate
securities, for a shorter period.
Asset-backed
securities are shares in a pool of debt instruments. These
securities are generally pass-through securities, which means that principal and
interest payments on the underlying securities (less servicing fees) are passed
through to shareholders on a pro rata basis. These securities involve both
extension risk, where borrowers pay off their debt obligations more slowly in
times of rising interest rates, and prepayment risk, where borrowers pay off
their debt obligations sooner than expected in times of declining interest
rates. In that case, the Fund may have to reinvest the proceeds from the
securities at a lower rate. Potential
34½Janus Detroit Street Trust
market
gains on a security subject to prepayment risk may be more limited than
potential market gains on a comparable security that is not subject to
prepayment risk. These risks may reduce the Fund’s returns.
Rule 144A securities
are securities that are not registered for sale to the general
public under the Securities Act, but that may be resold to certain institutional
investors.
U.S. Government
securities include direct obligations of the U.S. Government that
are supported by its full faith and credit. Treasury bills have initial
maturities of less than one year. Treasury notes have initial maturities of one
to ten years, and Treasury bonds may be issued with any maturity but generally
have maturities of at least ten years. U.S. Government securities also include
indirect obligations of the U.S. Government that are issued by federal agencies
and government sponsored entities. Unlike Treasury securities, agency securities
generally are not backed by the full faith and credit of the U.S. Government.
Some agency securities are supported by the right of the issuer to borrow from
the Treasury, others are supported by the discretionary authority of the U.S.
Government to purchase the agency’s obligations, and others are supported only
by the credit of the sponsoring agency.
Variable and floating
rate securities have variable or floating rates of interest and,
under certain limited circumstances, may have varying principal amounts.
Variable and floating rate securities pay interest at rates that are adjusted
periodically according to a specified formula, usually with reference to some
interest rate index or market interest rate (the “underlying index”). The
floating rate tends to decrease the security’s price sensitivity to changes in
interest rates.
|
FUTURES AND OTHER DERIVATIVES |
Derivatives
are instruments that have a value derived from, or directly linked
to an underlying asset (stock, bond, commodity, currency, interest rate or
market index). Types of derivatives can include, but are not limited to options,
forward contracts, swaps, and futures contracts.
Forward contracts
are contracts to purchase or sell a specified amount of a
financial instrument for an agreed upon price at a specified time. Forward
contracts are not currently exchange-traded and are typically negotiated on an
individual basis. The Fund may enter into forward currency contracts to hedge
against declines in the value of securities denominated in, or whose value is
tied to, a currency other than the U.S. dollar or to reduce the impact of
currency appreciation on purchases of such securities.
Futures contracts
are contracts that obligate the buyer to receive and the seller to
deliver an instrument or money at a specified price on a specified date. The
Fund may buy and sell futures contracts on foreign currencies, securities, and
financial indices including indices of U.S. Government, foreign government, or
fixed-income securities. Futures contracts are standardized and traded on
designated exchanges.
Interest rate swaps
involve the exchange by two parties of their respective
commitments to pay or receive interest (e.g., an exchange of floating rate
payments for fixed rate payments).
|
OTHER INVESTMENTS, STRATEGIES, AND/OR TECHNIQUES |
Cash sweep program
is an arrangement in which the Fund’s uninvested cash balance is
used to purchase shares of affiliated or non‑affiliated money market funds or
unregistered cash management pooled investment vehicles that operate pursuant to
the provisions of the 1940 Act that govern the operation of money market funds
at the end of each day.
Diversification
is a classification given to a fund under the 1940 Act. Funds are
classified as either “diversified” or “nondiversified.” To be classified as
“diversified” under the 1940 Act, a fund may not, with respect to 75% of its
total assets, invest more than 5% of its total assets in any issuer and may not
own more than 10% of the outstanding voting securities of an issuer. A fund that
is classified as “nondiversified” under the 1940 Act, on the other hand, has the
flexibility to take larger positions in a smaller number of issuers than a fund
that is classified as “diversified.” However, because the appreciation or
depreciation of a single security may have a greater impact on the net asset
value of a fund which is classified as nondiversified, its share price can be
expected to fluctuate more than a comparable fund which is classified as
diversified.
Industry
concentration for purposes under the 1940 Act is the investment of
25% or more of the Fund’s total assets in an industry or group of
industries.
Net long
is a term used to describe when the Fund’s assets committed to
long positions exceed those committed to short positions.
35½Janus Detroit Street Trust
Repurchase agreements
involve the purchase of a security by the Fund and a simultaneous
agreement by the seller (generally a bank or dealer) to repurchase the security
from the Fund at a specified date or upon demand. This technique offers a method
of earning income on idle cash. These securities involve the risk that the
seller will fail to repurchase the security, as agreed. In that case, the Fund
will bear the risk of market value fluctuations until the security can be sold
and may encounter delays and incur costs in liquidating the security.
When-issued, delayed
delivery, and forward commitment transactions generally involve
the purchase of a security with payment and delivery at some time in the future
– i.e., beyond normal settlement. The Fund does not earn interest on such
securities until settlement and bears the risk of market value fluctuations in
between the purchase and settlement dates. New issues of stocks and bonds,
private placements, and U.S. Government securities may be sold in this
manner.
36½Janus Detroit Street Trust
EXPLANATION
OF RATING CATEGORIES
The
following is a description of credit ratings issued by three of the major credit
rating agencies. Credit ratings evaluate only the safety of principal and
interest payments, not the market value risk of lower quality securities. Credit
rating agencies may fail to change credit ratings to reflect subsequent events
on a timely basis. Although the Adviser considers security ratings when making
investment decisions, it also performs its own investment analysis and does not
rely solely on the ratings assigned by credit agencies.
|
|
|
Bond
Rating |
|
Explanation |
Investment Grade |
|
|
|
|
AAA |
|
Highest rating; extremely strong capacity
to pay principal and interest. |
|
|
AA |
|
High quality; very strong capacity to pay
principal and interest. |
|
|
A |
|
Strong capacity to pay principal and
interest; somewhat more susceptible to the adverse effects of changing
circumstances and economic conditions. |
|
|
BBB |
|
Adequate capacity to pay principal and
interest; normally exhibit adequate protection parameters, but adverse
economic conditions or changing circumstances more likely to lead to a
weakened capacity to pay principal and interest than for higher rated
bonds. |
|
|
Non‑Investment
Grade |
|
|
|
|
BB |
|
Less vulnerable to nonpayment than other
speculative issues; major ongoing uncertainties or exposure to adverse
business, financial, or economic conditions which could lead to the
obligor’s inadequate capacity to meet its financial commitment on the
obligation. |
|
|
B |
|
More vulnerable to nonpayment than
obligations rated “BB,” but capacity to meet its financial commitment on
the obligation; adverse business, financial, or economic conditions will
likely impair the obligor’s capacity or willingness to meet its financial
commitment on the obligation. |
|
|
CCC |
|
Currently vulnerable to nonpayment, and is
dependent upon favorable business, financial, and economic conditions for
the obligor to meet its financial commitment on the obligation. |
|
|
CC |
|
Currently highly vulnerable to
nonpayment. |
|
|
C |
|
Currently highly vulnerable to nonpayment;
a bankruptcy petition may have been filed or similar action taken, but
payments on the obligation are being continued. |
|
|
D |
|
In default. |
37½Janus Detroit Street Trust
|
|
|
Long-Term Bond
Rating |
|
Explanation |
Investment Grade |
|
|
|
|
AAA |
|
Highest credit quality. Denotes the lowest
expectation of credit risk. Exceptionally strong capacity for payment of
financial commitments. |
|
|
AA |
|
Very high credit quality. Denotes
expectations of very low credit risk. Very strong capacity for payment of
financial commitments. |
|
|
A |
|
High credit quality. Denotes expectations
of low credit risk. Strong capacity for payment of financial commitments.
May be more vulnerable to changes in circumstances or in economic
conditions than is the case for higher ratings. |
|
|
BBB |
|
Good credit quality. Currently
expectations of low credit risk. Capacity for payment of financial
commitments is considered adequate, but adverse changes in circumstances
and economic conditions are more likely to impair this capacity than is
the case for higher ratings. |
|
|
Non‑Investment
Grade |
|
|
|
|
BB |
|
Speculative. Indicates possibility of
credit risk developing, particularly as the result of adverse economic
change over time. Business or financial alternatives may be available to
allow financial commitments to be met. |
|
|
B |
|
Highly speculative. May indicate
distressed or defaulted obligations with potential for extremely high
recoveries. |
|
|
CCC |
|
May indicate distressed or defaulted
obligations with potential for superior to average levels of
recovery. |
|
|
CC |
|
May indicate distressed or defaulted
obligations with potential for average or below-average levels of
recovery. |
|
|
C |
|
May indicate distressed or defaulted
obligations with potential for below-average to poor recoveries. |
|
|
D |
|
In default. |
|
|
Short-Term Bond
Rating |
|
Explanation |
|
|
F‑1+ |
|
Exceptionally strong credit quality.
Issues assigned this rating are regarded as having the strongest degree of
assurance for timely payment. |
|
|
F‑1 |
|
Very strong credit quality. Issues
assigned this rating reflect an assurance for timely payment only slightly
less in degree than issues rated F‑1+. |
|
|
F‑2 |
|
Good credit quality. Issues assigned this
rating have a satisfactory degree of assurance for timely payments, but
the margin of safety is not as great as the F‑1+ and F‑1
ratings. |
|
MOODY’S INVESTORS SERVICE, INC. |
|
|
|
Bond
Rating |
|
Explanation |
Investment Grade |
|
|
|
|
Aaa |
|
Highest quality, smallest degree of
investment risk. |
|
|
Aa |
|
High quality; together with Aaa bonds,
they compose the high-grade bond group. |
|
|
A |
|
Upper to medium-grade obligations; many
favorable investment attributes. |
|
|
Baa |
|
Medium-grade obligations; neither highly
protected nor poorly secured. Interest and principal appear adequate for
the present but certain protective elements may be lacking or may be
unreliable over any great length of time. |
|
|
Non‑Investment
Grade |
|
|
|
|
Ba |
|
More uncertain, with speculative elements.
Protection of interest and principal payments not well safeguarded during
good and bad times. |
|
|
B |
|
Lack characteristics of desirable
investment; potentially low assurance of timely interest and principal
payments or maintenance of other contract terms over time. |
|
|
Caa |
|
Poor standing, may be in default; elements
of danger with respect to principal or interest payments. |
|
|
Ca |
|
Speculative in a high degree; could be in
default or have other marked shortcomings. |
|
|
C |
|
Lowest rated; extremely poor prospects of
ever attaining investment standing. |
38½Janus Detroit Street Trust
Unrated
securities will be treated as non‑investment grade securities unless the
portfolio manager determines that such securities are the equivalent of
investment grade securities. When calculating the quality assigned to securities
that receive different ratings from two or more agencies (“split-rated
securities”), the security will receive: (i) the middle rating from the
three reporting agencies if three agencies provide a rating for the security or
(ii) the lowest rating if only two agencies provide a rating for the
security.
39½Janus Detroit Street Trust
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40½Janus Detroit Street Trust
You
can make inquiries and request other information, including a Statement of
Additional Information, annual report, or semiannual report (as they become
available), free of charge, by contacting your broker-dealer, plan sponsor, or
financial intermediary, or by contacting a representative at 800‑668‑0434. The
Fund’s Statement of Additional Information and most recent annual and semiannual
reports are also available, free of charge, at janushenderson.com/info.
Additional information about the Fund’s investments is available in the Fund’s
annual and semiannual reports. In the Fund’s annual and semiannual reports, you
will find a discussion of the market conditions and investment strategies that
significantly affected the Fund’s performance during its last fiscal period.
Other information is also available from financial intermediaries that sell
shares of the Fund.
The
Statement of Additional Information provides detailed information about the Fund
and is incorporated into this Prospectus by reference. Reports and other
information about the Fund are available on the Electronic Data Gathering
Analysis and Retrieval (EDGAR) Database on the SEC’s website at
http://www.sec.gov. You may obtain copies of this information, after paying a
duplicating fee, by electronic request at the following e‑mail address:
[email protected].
janushenderson.com/info
151
Detroit Street
Denver,
CO 80206-4805
800‑668‑0434
The
Trust’s Investment Company Act File No. is 811‑23112.