485BPOS
February
28, 2022
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Ticker |
Janus
Henderson Mortgage-Backed Securities ETF |
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JMBS |
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 Mortgage-Backed Securities 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.
TABLE
OF CONTENTS
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1½Janus Henderson Mortgage-Backed
Securities ETF
FUND
SUMMARY
Janus
Henderson Mortgage-Backed Securities ETF
Ticker: JMBS
Janus Henderson Mortgage-Backed Securities ETF
seeks a high level of total return consisting of income and capital
appreciation.
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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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0.28% |
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Other
Expenses |
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0.00% |
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Acquired
Fund Fees and Expenses(1) |
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0.01% |
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Total
Annual Fund Operating Expenses |
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0.29% |
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(1) |
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
$10,000 in the Fund for the time periods indicated and then sell all of your
shares at the end of those periods. The Example also assumes that your
investment has a 5% return each year and that the Fund’s operating expenses
remain the same. Although your actual costs may be higher or lower, based on
these assumptions your costs would be:
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1 Year |
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3 Years |
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5 Years |
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10 Years |
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$ |
30 |
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$ |
93 |
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$ |
163 |
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$ |
368 |
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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 162% of the average value of its
portfolio.
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PRINCIPAL INVESTMENT STRATEGY |
The
Fund seeks to achieve its investment objective by investing mainly in
mortgage-related instruments. Under normal circumstances, the Fund will invest
at least 80%, and often times substantially all, of its net assets (plus any
borrowings for investment purposes) in a portfolio of mortgage-related fixed
income instruments of varying maturities. Mortgage-related fixed income
instruments include residential and commercial mortgage-backed securities
(“MBS”), collateralized mortgage obligations, stripped mortgage-backed
securities, mortgage pass-through securities, credit risk transfer (“CRT”)
securities, and other securities representing an interest in or secured by or
related to mortgages, including asset-backed securities and securities issued by
other ETFs that invest principally in MBS. Under normal circumstances, the Fund
will invest predominantly in mortgage-related securities issued by the U.S.
government and its agencies, such as the Government National Mortgage
Association (“GNMA” or “Ginnie Mae”), the Federal National Mortgage Association
(“FNMA” or “Fannie Mae”) or the Federal Home Loan Mortgage Corporation (“FHLMC”
or “Freddie Mac”). The Fund may also invest up to 20% of its net assets in
non‑agency, or privately-issued, residential and commercial MBS, and other
non‑agency or privately issued
mortgage-related
2½Janus Henderson Mortgage-Backed
Securities ETF
and
asset-backed securities. The Fund will typically enter into “to be announced” or
“TBA” commitments when purchasing MBS, which allows the Fund to agree to pay for
certain yet-to-be issued securities at a future date and which may have a
leveraging effect on the Fund. Similar to its use of leverage with respect to
TBAs, the Fund may enter into reverse repurchase agreement transactions and use
the cash made available from these transactions to make additional investments
in mortgage-related instruments or other fixed-income securities. In addition to
its investments in mortgage-backed and mortgage-related securities, the Fund
will from time to time also invest in certain other fixed-income securities
and/or hold cash and cash-equivalents (such as U.S. treasuries). The Fund will
invest primarily in securities rated investment grade (that is, securities rated
Baa3/BBB‑ or higher, or if unrated, determined to be of comparable credit
quality by the Adviser). The Fund may also invest in lower-rated,
higher-yielding securities, including securities rated below investment grade
(sometimes referred to as “junk” bonds), when the Adviser believes that the
increased risk of such lower rated securities is justified by the potential for
increased return. The Fund invests only in U.S. dollar denominated securities.
The Fund may invest its uninvested cash in affiliated or non‑affiliated money
market funds or unregistered cash management pooled investment vehicles that
operate as money market funds.
As
a general indication of the Fund’s targeted risk/return profile, the Fund’s
portfolio managers will seek to select mortgage-related instruments that can
over time provide a return of 0.50% (net of fees) above the Bloomberg US MBS
Index Total Return Value Unhedged USD (“Bloomberg US MBS Index” or the “Index”),
while generally maintaining an investment return with substantial correlation to
the Index. There can be no assurance that the Fund will achieve this targeted
risk/return.
Additionally,
the Fund may invest in derivatives, which are instruments that have a value
derived from, or directly linked to, an underlying asset, such as fixed-income
securities, interest rates, or market indices. In particular, the Fund may use
swaps, futures, forward contracts and options. The Fund may use derivatives only
to manage or hedge portfolio risk, including interest rate risk, or to manage
duration. The Fund’s exposure to derivatives will vary. The Fund may also enter
into short positions for hedging
purposes.
The
Fund is “actively managed” and does not seek to replicate the composition or
performance of an index. In addition to considering economic factors such as the
effect of interest rates on the Fund’s investments, the portfolio managers apply
a “bottom up” approach in choosing investments. 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 additionally consider the expected
risk-adjusted return on a particular investment and the Fund’s overall target
risk allocations and volatility.
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.
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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.
Mortgage-Backed
Securities Risk. Mortgage-backed securities are
classified generally as either commercial mortgage-backed securities or
residential mortgage-backed securities, each of which is subject to certain
specific risks. Mortgage-backed securities may be more sensitive to changes in
interest rates than other types of debt securities. Investments in
mortgage-backed securities are subject to both extension risk and prepayment
risk. 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. Extension risk is the risk that borrowers may
pay off their debt obligations more slowly in times of rising interest rates.
These risks may reduce the Fund’s returns. In addition, investments in
mortgage-backed securities, including those comprised of subprime mortgages, may
be subject to a higher degree of credit risk, valuation risk, and liquidity risk
than various other types of fixed-income
securities.
Privately Issued
Mortgage-Related Securities Risk. Privately issued mortgage-related
securities may not be subject to the same underwriting requirements for the
underlying mortgages that are applicable to those mortgage-related securities
that have a government or government-sponsored entity guarantee. As a result,
the mortgage loans underlying privately issued mortgage-related securities may,
and frequently do, have less favorable collateral, credit risk, or other
underwriting characteristics than government or government-sponsored
mortgage-related securities and have wider variances in a number of terms
including interest rate, term, size, purpose, and borrower characteristics. The
risk of nonpayment is greater for mortgage-related securities that are backed by
loans that were originated under weak underwriting standards, including loans
made to borrowers with limited means to make repayment. A level of risk exists
for all loans, although, historically, the poorest performing loans have been
those classified as subprime. “Subprime” loans are loans made to borrowers with
lower credit ratings and/or a shorter
3½Janus Henderson Mortgage-Backed
Securities ETF
credit
history, who are more likely to default on their loan obligations as compared to
more credit-worthy borrowers. Privately issued mortgage-related securities are
not traded on an exchange. There may be a limited market for the securities,
especially when there is a perceived weakness in the mortgage and real estate
market sectors. Without an active trading market, mortgage-related securities
held in the Fund’s portfolio may be particularly difficult to value because of
the complexities involved in assessing the value of the underlying mortgage
loans.
Credit Risk Transfer
Securities Risk. Because credit risk transfer (“CRT”)
securities are unguaranteed and unsecured, these investments are subject to
certain unique risks in addition to the risks associated with investments in
mortgage-backed securities issued by government sponsored entities (“GSEs”) or
private issuers, which include credit, prepayment, extension, interest rate,
valuation and liquidity risks. For example, in the event of a default, investors
such as the Fund have no recourse to the underlying mortgage loans. In addition,
some or all of the mortgage default risk associated with the underlying mortgage
loans is transferred to investors. As a result, the Fund’s investments in CRT
securities are subject to the risk of
loss.
TBA Commitments
Risk. The Fund will typically enter into “to be
announced” or “TBA” commitments for mortgage-backed securities and, at times,
the portion of the Fund’s portfolio allocated to TBA securities may be
significant. TBA commitments are forward agreements for the purchase or sale of
securities, including mortgage-backed securities, for a fixed price, with
payment and delivery on an agreed upon future settlement date. Although the
particular TBA securities must meet industry-accepted “good delivery” standards,
there can be no assurance that a security purchased on a forward commitment
basis will ultimately be issued or delivered by the counterparty. There is a
risk that the security that the Fund buys will lose value between the purchase
and settlement dates. Because TBA commitments do not require the delivery of a
specific security, the characteristics of a security delivered to the Fund may
be less favorable than expected. If the counterparty to a transaction fails to
deliver the securities, the Fund could suffer a loss. TBA purchase and sales
commitments may significantly increase the Fund’s portfolio turnover rate and
are not included in the portfolio turnover rate calculation. The Fund is
generally not required to pay for the TBA security until the settlement date
and, as a result, if the Fund remains substantially fully invested at a time
when TBA commitment purchases are outstanding, the purchases may result in a
form of leverage.
Reverse Repurchase
Agreement Risk. Reverse repurchase agreements involve
the risk that the value of securities that the Fund is obligated to repurchase
under the agreement may decline below the repurchase price. Additionally, such
transactions are only advantageous if the interest cost to the Fund of the
reverse repurchase transaction is less than the cost of obtaining the cash
otherwise. Interest costs on the proceeds received in a reverse repurchase
agreement may exceed the return received on the investments made by the Fund
with those proceeds, resulting in reduced returns to shareholders. When the Fund
enters into a reverse repurchase agreement, it is subject to the risk that the
buyer (counterparty) may default on its obligations to the Fund. In the event of
such a default, the Fund may experience delays, costs, and losses, all of which
may reduce returns to shareholders. Investing reverse repurchase proceeds may
also have a leveraging effect on the Fund’s portfolio. The Fund’s use of
leverage can magnify the effect of any gains or losses, causing the Fund to be
more volatile than if it had not been leveraged. There is no assurance that any
leveraging strategy used by the Fund will be
successful.
Asset-Backed
Securities Risk. Asset-backed securities may be
adversely affected by changes in interest rates, underperformance of the
underlying assets, and the creditworthiness of the entities that provide any
supporting letters of credit, surety bonds, or other credit or liquidity
enhancements. In addition, most asset-backed securities are subject to
prepayment risk in a declining interest rate environment, and extension risk in
an increasing rate environment.
Fixed-Income
Securities Risk. The Fund invests in a
variety of debt and other fixed-income securities. Typically, the value of
fixed-income securities changes 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. 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. Investments in fixed-income securities with
very low or negative interest rates may diminish the Fund’s yield and
performance. Recent and potential future changes in government monetary policy
may also affect the level of interest rates. 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. How specific fixed-income
securities may react to changes in interest rates will depend on the specific
characteristics of each security. Fixed-income securities are also subject to
credit risk, prepayment risk, valuation risk, extension risk, and liquidity
risk. Credit risk 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. 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.
4½Janus Henderson Mortgage-Backed
Securities ETF
High-Yield/High-Risk
Bond Risk. High-yield/high-risk bonds
may be more sensitive than other types of bonds to economic changes, political
changes, or adverse developments specific to the company that issued the bond,
which may adversely affect their value. High-yield/high-risk bonds (or “junk”
bonds) are bonds rated below investment grade by the primary rating agencies
such as S&P Global Ratings, Fitch, Inc., and Moody’s Investors Service, Inc.
or are unrated bonds of similar quality. The value of lower quality bonds
generally is more dependent on credit risk than investment grade bonds. Issuers
of high-yield/high-risk bonds may not be as strong financially as those issuing
bonds with higher credit ratings and are more vulnerable to real or perceived
economic changes, political changes, or adverse developments specific to the
issuer. In addition, the junk bond market is considered to be speculative in
nature and can experience sudden and sharp price
swings.
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, futures,
and options, 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. The use of
derivatives to hedge may 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.
Portfolio Turnover
Risk. 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.
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
5½Janus Henderson Mortgage-Backed
Securities ETF
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 for 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.
Janus
Henderson Mortgage-Backed Securities ETF
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Annual Total Returns (calendar
year‑end) |
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Best
Quarter: 2nd Quarter
2020 3.36% Worst
Quarter: 1st Quarter 2021 –0.73% |
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Average
Annual Total Returns (periods ended 12/31/21) |
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1 Year |
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Since Inception
9/12/18 |
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Janus Henderson Mortgage-Backed Securities
ETF |
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Return Before
Taxes |
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–0.43 |
% |
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4.30 |
% |
Return After Taxes on
Distributions |
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–0.89 |
% |
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3.21 |
% |
Return After Taxes on Distributions and
Sale of Fund Shares(1) |
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–0.25 |
% |
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2.84 |
% |
Bloomberg U.S. Mortgage Backed
Securities Index(2) (reflects no
deductions for fees, expenses or taxes) |
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–1.04 |
% |
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3.31 |
% |
(1) |
If the Fund incurs a
loss, which generates a tax benefit, the Return After Taxes and Sale of
Fund Shares may exceed the Fund’s other return
figures. |
(2) |
Index
performance shown in the table is the total return, which assumes
reinvestment of any dividends and distributions during the time periods
shown. |
6½Janus Henderson Mortgage-Backed
Securities ETF
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 exchange-traded fund. 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, and 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.
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.
7½Janus Henderson Mortgage-Backed
Securities 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). |
|
° |
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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. Under normal circumstances, the Fund will
generally sell or dispose of its portfolio investments when, in the opinion of
the Adviser, they have reached their profit or price target, or as the result of
changing market conditions. The Fund is designed for investors who seek exposure
to an actively managed portfolio consisting primarily of mortgage-related
fixed-income instruments.
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. If there is a
material change to the Fund’s 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 be utilized
to a lesser extent, and where applicable, are noted as non‑principal investment
strategies. Except for the Fund’s policies with respect to investments in
illiquid investments and borrowing, 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 will 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 money from a bank up to a limit of 5% of the value of its
assets, but only for temporary or emergency purposes. For temporary liquidity
and cash management purposes, the Fund may invest in other exchange-traded funds
(“ETFs”) that provide exposure to mortgage-related securities.
8½Janus Detroit Street Trust
Asset-Backed
Securities
The
Fund will typically invest in asset-backed securities backed by pools of home
equity loans and other mortgage-related debt, credit cards and automobile loans.
Asset-backed securities are collateralized by pools of obligations or assets.
Most asset-backed securities involve pools of consumer or commercial debts with
maturities less than ten years. However, almost any type of asset may be used to
create an asset-backed security. Asset-backed securities may take the form of
commercial paper, notes, or pass-through certificates and may be structured as
floaters, inverse floaters, interest-only and principal-only obligations.
Similar
to mortgage-backed securities, payments on asset-backed securities include both
interest and a partial payment of principal. The value of the Fund’s 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 individuals. The Fund
could incur a loss if the underlying loans are not paid. In addition, most
asset-backed securities are subject to prepayment risk in a declining interest
rate environment. 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 stay fully invested. For example, when the portfolio
managers believe that market conditions are unfavorable for investing in
mortgage-backed, mortgage-related and other fixed-income instruments, the Fund’s
investment in cash or cash equivalents, such as U.S. treasury securities,
commercial paper, repurchase agreements and other short-duration fixed-income
securities, and/or affiliated or non‑affiliated money market funds (or
unregistered cash management pooled investment vehicles that operate as money
market funds), may increase. 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.
Additionally,
in unusual circumstances, such as to protect its assets or maintain liquidity in
certain circumstances to meet unusually large redemptions, the Fund may
temporarily further increase its cash or cash equivalent position up to 100% of
its assets.
Credit
Risk Transfer Securities
The
Fund may invest in credit risk transfer (“CRT”) securities. CRTs are
unguaranteed and unsecured debt securities issued by a government-related
organization or a special purpose vehicle (“SPV”), respectively, and therefore
are not directly linked to or backed by the underlying mortgage loans. Unlike
mortgage-backed securities, investors in CRT securities issued by a
government-related organization have no recourse to the underlying mortgage
loans. In addition, some or all of the mortgage default risk associated with the
underlying mortgage loans is transferred to the noteholder. Therefore, the Fund
could lose all or part of its investments in CRT securities in the event of a
default by the underlying mortgages.
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.
High-Yield/High-Risk
Bonds
A
high-yield/high-risk bond (also called a “junk” bond) is a bond rated below
investment grade by major rating agencies (i.e., BB+ or lower by S&P Global
Ratings (“Standard & Poor’s”) and Fitch, Inc. (“Fitch”), or Ba or lower
by Moody’s Investors
9½Janus Detroit Street Trust
Service,
Inc. (“Moody’s”)) or is an unrated bond of similar quality. Junk bonds are
considered to be speculative in nature and present greater risk of default (the
failure to make timely interest and principal payments) than higher quality
bonds.
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.
Interest
Rate Futures Contracts
Interest
rate futures contracts, including futures contracts on US treasuries,
Eurodollars and other futures contracts that provide interest rate exposure, are
typically exchange-traded, are typically used to obtain interest rate exposure
in order to manage duration and hedge interest rate risk. 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.
Leverage
Leverage
occurs when the Fund increases its assets available for investment using reverse
repurchase agreements, when-issued, delayed delivery, or forward commitment
transactions (including TBA securities), or other similar transactions. The Fund
may use leverage for investment purposes by entering into reverse repurchase
agreement transactions and using the cash made available from these transactions
to make additional investments in fixed-income securities in accordance with the
Fund’s principal strategies. In addition, other investment techniques, such as
certain derivative transactions, can create a leveraging effect.
Mortgage-Backed
Securities
Mortgage-backed
securities represent an ownership interest in a pool of mortgage loans used to
finance purchases of real estate. The mortgage loans that comprise a pool
normally have similar interest rates (fixed or variable), maturities and other
terms. Pools of mortgages financing residential home purchases are referred to
as residential mortgage-backed securities (“RMBS”), while pools of mortgages
financing commercial buildings, multi-family properties and other real estate
are referred to as commercial mortgage-backed securities (“CMBS”).
Mortgage-backed securities may be issued or guaranteed by the U.S. government,
its agencies or instrumentalities (“agency mortgage-backed securities”), or may
be issued or guaranteed by private entities such as commercial banks, savings
and loan institutions or mortgage bankers (“privately issued mortgage-backed
securities”).
The
Fund will primarily invest in fixed or variable rate agency mortgage-backed
securities issued by the Government National Mortgage Association (“Ginnie
Mae”), the Federal National Mortgage Association (“Fannie Mae”), the Federal
Home Loan Mortgage Corporation (“Freddie Mac”), or other governmental or
government-related entities. Ginnie Mae’s guarantees are backed by the full
faith and credit of the U.S. Government. Fannie Maes and Freddie Macs are not
backed by the full faith and credit of the U.S. Government. The U.S. Department
of the Treasury, however, has the authority to support Fannie Mae and Freddie
Mac by purchasing limited amounts of their respective obligations.
Unlike
traditional debt instruments, payments on mortgage-backed securities include
both interest and a partial payment of principal. Prepayment of the principal of
underlying loans at a faster pace than expected is known as “prepayment risk,”
and may shorten the effective maturities of these securities. This may result in
the Fund having to reinvest proceeds at a lower interest rate. Mortgage-backed
securities tend to be more sensitive to changes in interest rates than other
types of debt securities. In addition to prepayment risk, investments in
privately-issued mortgage-backed securities may be subject to a higher degree of
credit risk, valuation risk, and liquidity risk than other mortgage-backed
securities. Mortgage-backed securities are also subject to extension risk, which
is the risk that rising interest rates could cause mortgages underlying these
securities to be paid more slowly than expected, increasing the Fund’s
sensitivity to interest rate changes and causing its price to decline. The risks
associated with CMBS reflect the risks of investing in the commercial real
estate securing the underlying mortgage loans and are therefore different from
the risks of other types of mortgage-backed securities.
10½Janus Detroit Street Trust
Mortgage
Dollar Rolls
The
Fund utilizes “mortgage dollar rolls,” which are similar to reverse repurchase
agreements in certain respects. In a “mortgage dollar roll” transaction, the
Fund sells a mortgage-related security (such as a Ginnie Mae security) to a
dealer and simultaneously agrees to repurchase a similar security (but not the
same security) in the future at a predetermined price. A “dollar roll” can be
viewed, like a reverse repurchase agreement, as a collateralized borrowing in
which the Fund pledges a mortgage-related security to a dealer to obtain cash.
Successful use of mortgage dollar rolls depends on the Fund’s ability to predict
interest rates and mortgage payments. Dollar roll transactions involve the risk
that the market value of the securities the Fund is required to purchase may
decline below the agreed upon repurchase price.
Options
on Futures Contracts
An
option on a futures contract gives the buyer the right, but not the obligation,
to buy or sell a futures contract at a specified price on or before a specified
date. Futures contracts and options on futures are standardized and traded on
designated exchanges.
Options
on Securities Indices
The
Fund may purchase and write put and call options on securities indices. A put
option on an index gives the holder the right to receive, upon exercise of the
option, an amount of cash if the closing level of the underlying index is less
than the exercise price of the option. A call option on an index gives the
holder the right to receive, upon exercise of the option, an amount of cash if
the closing level of the underlying index is greater than the exercise price of
the option. This amount of cash is equal to the difference between the closing
price of the index and the exercise price of the option, expressed in dollars
multiplied by a specified number. Thus, unlike options on individual securities,
all settlements are in cash, and gain or loss depends on price movements in the
particular market represented by the index generally, rather than the price
movements in individual securities. The premium paid to the writer is
consideration for undertaking the obligations under the option contract.
Options
on Swap Contracts
The
Fund may enter into options on swap agreements, commonly referred to as
“swaptions.” A swaption is a contract that gives a purchaser the right, but not
the obligation, to enter into a new swap agreement or to shorten, extend,
cancel, or otherwise modify an existing swap agreement, at some designated
future time on specified terms. Swaptions can be used for a variety of purposes,
including to manage the Fund’s overall exposure to changes in interest rates and
credit quality; as an efficient means of adjusting the Fund’s exposure to
certain markets; in an effort to enhance income or total return or protect the
value of portfolio securities; to serve as a cash management tool; and to adjust
portfolio duration or credit risk.
Pass
Through Securities
A
pass-through security is a share or certificate of interest in a pool of debt
obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer. 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
during periods of declining interest rates. 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. Due to the
nature of the securities in which it invests, the Fund may have relatively high
portfolio turnover compared to other funds.
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.
11½Janus Detroit Street Trust
Reverse
Repurchase Agreements
Reverse
repurchase agreements involve the sale of a security by the Fund to another
party (generally a bank or dealer) in return for cash and an agreement by the
Fund to buy the security back at a specified price and time. The Fund may use
this technique to obtain cash for investment purposes, or for other temporary or
emergency purposes.
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 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.
Short
Positions
The
Fund may invest in short positions for hedging purposes using interest rate
futures, swaps, forward contracts, options and also through the short sale of
portfolio securities, including ETFs. A short sale is generally a transaction in
which the Fund sells a security it does not own or have the right to acquire (or
that it owns but does not wish to deliver) in anticipation that the market price
of that security will decline. To complete the transaction, the Fund must borrow
the security to make delivery to the buyer. The Fund is then obligated to
replace the security borrowed by purchasing the security at the market price at
the time of replacement. A short sale is subject to the risk that if the price
of the security sold short increases in value, the Fund will incur a loss
because it will have to replace the security sold short by purchasing it at a
higher price. In addition, the Fund may not always be able to close out a short
position at a particular time or at an acceptable price. A lender may request,
or market conditions may dictate, that the securities sold short be returned to
the lender on short notice, and the Fund may have to buy the securities sold
short at an unfavorable price. If this occurs at a time that other short sellers
of the same security also want to close out their positions, it is more likely
that the Fund will have to cover its short sale at an unfavorable price and
potentially reduce or eliminate any gain, or cause a loss, as a result of the
short sale. Because there is no upper limit to the price a borrowed security may
reach prior to closing a short position, the Fund’s losses are potentially
unlimited in a short sale transaction. The Fund’s gains and losses will also be
decreased or increased, as the case may be, by the amount of any dividends,
interest, or expenses, including transaction costs and borrowing fees, the Fund
may be required to pay in connection with a short sale. Such payments may result
in the Fund having higher expenses than a fund that does not engage in short
sales and may negatively affect the Fund’s performance.
To
the extent that the Fund enters into short derivative positions, the Fund may be
exposed to risks similar to those associated with short sales, including the
risk that the Fund’s losses are theoretically unlimited. Short sales and short
derivatives positions have a leveraging effect on the Fund, which may increase
the Fund’s volatility.
Swap
Agreements
The
Fund may utilize swap agreements such as credit default, interest rate, and
total return swaps, as a means to hedge its portfolio against adverse movements
in securities prices, the rate of inflation, or interest rates. Swap agreements
are two‑party contracts to exchange one set of cash flows for another. Swap
agreements entail the risk that a party will default on its payment obligations
to the Fund. If the other party to a swap defaults, the Fund would risk the loss
of the net amount of the payments that it contractually is entitled to receive.
If the Fund utilizes a swap at the wrong time or judges market conditions
incorrectly, the swap may result in a loss to the Fund and reduce the Fund’s
total return. Various types of swaps such as credit default, interest rate, and
total return swaps are described in this Prospectus and/or in the “Glossary of
Investment Terms.”
Index Credit Default Swaps – The Fund may invest in index credit default
swaps (“CDX”). A CDX is a centrally cleared swap on an index of credit default
swaps. CDXs allow an investor to manage credit risk or take a position on a
basket of credit entities (such as credit default swaps or commercial
mortgage-backed securities) in a more efficient manner than transacting
12½Janus Detroit Street Trust
in
a single-name credit default swap. If a credit event occurs in one of the
underlying companies, the protection is paid out via the delivery of the
defaulted bond by the buyer of protection in return for a payment of notional
value of the defaulted bond by the seller of protection or it may be settled
through a cash settlement between the two parties. The underlying company is
then removed from the index. New series of CDXs are issued on a regular
basis.
Interest Rate Swaps – 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.
TBA
Commitments
The
Fund will typically enter into “to be announced” or “TBA” commitments. TBA
commitments are forward agreements for the purchase or sale of securities,
including mortgage-backed securities, for a fixed price, with payment and
delivery on an agreed upon future settlement date. The specific securities to be
delivered are not identified at the trade date. However, delivered securities
must meet industry-accepted “good delivery” standards, which include specified
terms, for issuer, rate, and mortgage terms. At the time the TBA commitment is
made, the transaction is recorded and thereafter the value of such securities is
reflected each day in determining the Fund’s NAV. Because the Fund is generally
not required to pay for the security until the settlement date, if the Fund
remains substantially fully invested at a time when TBA commitment purchases are
outstanding, the purchases may result in a form of leverage. To facilitate these
TBA commitments, the Fund is required to segregate or otherwise earmark liquid
assets marked to market daily in an amount at least equal to such TBA
commitments.
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 may invest in securities with 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. Inverse
floating rate securities (“Inverse Floaters”) are debt instruments whose
interest bears an inverse relationship to the interest rate on another security.
A rise in the reference rate of an inverse floater will cause a drop in the
interest rate paid by the inverse floater, while a drop in the reference rate of
the inverse floater will cause an increase in the interest rate paid on the
inverse floater. Inverse Floaters may exhibit greater price volatility than a
fixed rate obligation with similar credit quality. Similar to variable and
floating rate obligations, effective use of inverse floaters requires skills
different from those needed to select most portfolio securities. If movements in
interest rates are incorrectly anticipated, the Fund could lose money, or its
NAV could decline by the use of inverse floaters.
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
13½Janus Detroit Street Trust
earning
a return on the Fund’s assets or reducing risk; however, they may not achieve
the Fund’s investment objective. These securities and strategies may include
fixed-income securities issued in private placement transactions.
The
value of your investment will vary over time, sometimes significantly, and you
may lose money by investing in the Fund. The Fund invests mainly in
mortgage-related instruments. 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.
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.
Collateralized
Mortgage Obligation Risk. The Fund may invest in
collateralized mortgage obligations (“CMOs”), which are a type of
mortgage-backed security. CMOs are created by dividing the principal and
interest payments collected on a pool of mortgages into several revenue streams
(tranches) with different priority rights to portions of the underlying mortgage
payments. Certain CMO tranches may represent a right to receive interest only
(“IOs”), principal only (“POs”) or an amount that remains after floating-rate
tranches are paid (an inverse floater). These securities are frequently referred
to as “mortgage derivatives” and may be extremely sensitive to changes in
interest rates. Interest rates on inverse floaters, for example, vary inversely
with a short-term floating rate (which may be reset periodically). Interest
rates on inverse floaters will decrease when short-term rates increase, and will
increase when short-term rates decrease. These securities have the effect of
providing a degree of investment leverage. In response to changes in market
interest rates or other market conditions, the value of an inverse floater may
increase or decrease at a multiple of the increase or decrease in the value of
the underlying securities. If the Fund invests in CMO tranches (including CMO
tranches issued by government agencies) and interest rates move in a manner not
anticipated by the Adviser, it is possible that the Fund could lose all or
substantially all of its investment.
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, swaps,
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.
14½Janus Detroit Street Trust
Credit Quality
Risk. The Fund is subject to the
risks associated with the credit quality of the issuers of fixed-income
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
fixed-income securities receive credit ratings from services such as
Standard & Poor’s, Fitch, and Moody’s. These services assign ratings to
securities by assessing the likelihood of issuer default. The lower a bond issue
is rated by an 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 bond rating categories.
Credit Risk Transfer
Securities Risk. Because CRT securities are
unguaranteed and unsecured, these investments are subject to certain unique
risks in addition to the risks associated with investments in mortgage-backed
securities issued by government sponsored entities (“GSEs”) or private issuers,
which include credit, prepayment, extension, interest rate, valuation and
liquidity risks. For example, in the event of a default, investors such as the
Fund have no recourse to the underlying mortgage loans. In addition, some or all
of the mortgage default risk associated with the underlying mortgage loans is
transferred to investors. Changes in interest rates (both increases and
decreases) may quickly and significantly reduce the value of CRT securities. CRT
securities are also subject to risks relating to interests in and/or the
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. As a result, a Fund’s investments in CRT
securities are subject to the risk of loss.
Derivatives
Risks. Derivatives, such as swaps, forwards, futures
and options, 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. If there is a
default by the other party to such a transaction, the Fund normally will have
contractual remedies pursuant to the agreements related to the transaction. To
the extent the Fund enters into short derivative positions, the Fund may be
exposed to risks similar to those associated with short sales, including the
risk that the Fund’s losses are theoretically unlimited.
The
Fund uses derivatives for 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
15½Janus Detroit Street Trust
incurs
from its derivatives transactions. This new regulatory framework will also
eliminate the asset segregation and coverage framework currently used by the
funds to comply with Section 18 of the 1940 Act in connection with derivatives
and certain other financing transactions. As the Fund transitions 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.
• |
|
Index Credit
Default Swaps Risk. If the Fund holds a long
position in a CDX, the Fund would indirectly bear its proportionate share
of any expenses paid by a CDX. By investing in CDXs, the Fund could be
exposed to illiquidity risk, counterparty risk, and credit risk of the
issuers of the underlying loan obligations and of the CDX markets. If
there is a default by the CDX counterparty, the Fund will have contractual
remedies pursuant to the agreements related to the transaction. CDXs also
bear the risk that the Fund will not be able to meet its obligation to the
counterparty. |
• |
|
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. |
• |
|
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. |
• |
|
Options on
Futures Contracts Risk. The amount of risk that
the Fund assumes when it purchases an option on a futures contract is the
premium paid for the option, plus related transaction costs. In order to
profit from an option purchased, it may be necessary to exercise the
option and to liquidate the underlying futures contract subject to the
risks of the availability of a liquid offset market. The seller of an
option on a futures contract is subject to the risks of commodity futures
trading, including the requirement of initial and variation margin
payments, as well as the additional risk that movements in the price of
the option may not correlate with movements in the price underlying
security, index, currency, or futures contracts. |
• |
|
Options on
Securities Indices Risk. Options on indices
may, depending on circumstances, involve greater risk than options on
securities. Because index options are settled in cash, when the Fund
writes a call on an index it may not be able to provide in advance for its
potential settlement obligations by acquiring and holding the underlying
securities. If the Fund is unable to effect a closing purchase transaction
with respect to covered options it has written, the Fund will not be able
to sell the underlying securities or dispose of assets held in a
segregated account until the options expire or are exercised. Similarly,
if the Fund is unable to effect a closing sale transaction with respect to
options it has purchased, it will have to exercise the options in order to
realize any profit and will incur transaction costs upon the purchase or
sale of underlying securities. |
• |
|
Options on Swap
Contracts Risk. Because the use of options on
swap contracts, or “swaptions,” generally does not involve the delivery of
securities or other underlying assets or principal, the risk of loss with
respect to swaptions generally is limited to the net amount of payments
that the Fund is contractually obligated to make. There is also a risk of
a default by the other party to a swaption, in which case the Fund may not
receive the net amount of payments that it contractually is entitled to
receive. Entering into a swaption contract involves, to varying degrees,
the elements of credit, market, and interest rate risk, associated with
both option contracts and swap contracts. |
• |
|
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. |
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 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
16½Janus Detroit Street Trust
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.
Fixed Income
Securities Risk. The Fund invests in a
variety of fixed-income securities. 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 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.
High-Yield/High-Risk
Bond Risk. High-yield/high-risk bonds
(or “junk” bonds) are bonds rated below investment grade by the primary rating
agencies such as Standard & Poor’s, Fitch, and Moody’s or are unrated
bonds of similar quality. The value of lower quality bonds generally is more
dependent on credit risk than investment grade bonds. Issuers of
high-yield/high-risk bonds may not be as strong financially as those issuing
bonds with higher credit ratings and are more vulnerable to real or perceived
economic changes, political changes, or adverse developments specific to the
issuer. In addition, the junk bond market is considered to be speculative in
nature and can experience sudden and sharp price swings.
The
secondary market on which high-yield securities are traded is less liquid than
the market for investment grade securities. The lack of a liquid secondary
market may have an adverse impact on the market price of the security.
Additionally, it may be more difficult to value the securities because valuation
may require more research, and elements of judgment may play a larger role in
the valuation because there is less reliable, objective data available.
Please
refer to the “Explanation of Rating Categories” section of this Prospectus for a
description of bond rating categories.
Interest Rate
Risk. Generally, a fixed-income
security will increase in value when prevailing interest rates fall and decrease
in value when prevailing interest rates rise. Longer-term securities are
generally more sensitive to interest rate changes than shorter-term securities,
but they generally offer higher yields to compensate investors for the
associated risks. High-yield bond prices and floating rate debt security prices
are generally less directly responsive to interest rate changes than investment
grade issues or comparable fixed rate securities, and may not always follow this
pattern. 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
17½Janus Detroit Street Trust
market
reaction to those initiatives. The Fund may manage interest rate risk by varying
the average-weighted effective maturity of the portfolio to reflect an analysis
of interest rate trends and other factors. The Fund’s average-weighted effective
maturity will tend to be shorter when the portfolio managers expect interest
rates to rise and longer when the portfolio managers expect interest rates to
fall. The Fund may also use futures, swaps, options, and other derivatives to
manage interest rate risk.
Leverage
Risk. Engaging in transactions
using leverage or those having a leveraging effect subjects the Fund to certain
risks. These risks may be heightened if the Fund invests all, or a significant
portion of its assets in futures, forwards, swaps, and other types of
derivatives. Leverage can magnify the effect of any gains or losses, causing the
Fund to be more volatile than if it had not been leveraged. Through the use of
leverage, the Fund’s total investment exposure could exceed the value of its
portfolio securities and its investment performance could be dependent on
securities not directly owned by the Fund. In addition, the Fund’s assets that
are used as collateral to secure short sale transactions may decrease in value
while the short positions are outstanding, which may force the Fund to use its
other, additional assets to meet its collateral requirements.
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.
Liquidity
Risk. The Fund may invest in securities or instruments
that do not trade actively or in large volumes, and may make investments that
are less liquid than other investments. Also, the Fund may make investments that
may become less liquid in response to market developments or adverse investor
perceptions. Investments that are illiquid or that trade in lower volumes may be
more difficult to value. When there is no willing buyer and investments cannot
be readily sold at the desired time or price, the Fund may have to accept a
lower price or may not be able to sell the security or instrument at all.
Investments in foreign securities, particularly those of issuers located in
emerging market countries, tend to have greater exposure to liquidity risk than
domestic securities. In unusual market conditions, even normally liquid
securities may be affected by a degree of liquidity risk (i.e., if the number
and capacity of traditional market participants is reduced). An inability to
sell one or more portfolio positions can adversely affect the Fund’s value or
prevent the Fund from being able to take advantage of other investment
opportunities. Liquidity risk may be increased to the extent that the Fund
invests in Rule 144A and restricted securities that are deemed to be illiquid
investments.
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. The Fund may underperform its benchmark index or other funds with
similar investment objectives.
Because
the Fund invests substantially all of its assets in fixed-income securities or
income-generating securities, it is subject to risks such as credit risk and
interest rate fluctuations. The Fund’s performance may also be affected by risks
of certain types of investments, such as derivative instruments. The Fund may
use futures, options, swap agreements (such as interest rate, credit default,
and total return swaps), and other derivative instruments individually or in
combination to “hedge” or protect its portfolio from adverse movements in
securities prices and interest rates. 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.
The
Fund’s performance may also be significantly affected, positively or negatively,
by the portfolio managers’ use of certain types of investments, such as
non‑investment grade bonds (“junk” bonds). Note that the portfolio managers’ use
of such investments may have a magnified performance impact on a fund with a
small asset base and the fund may not experience similar performance as its
assets grow.
18½Janus Detroit Street Trust
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 commodities prices, or if the market favors
different types of securities than the types of securities in which the Fund
invests. 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.
Mortgage- and
Asset-Backed Securities Risk. Rising interest rates tend
to extend the duration of, or reduce the rate of prepayments on, both commercial
mortgage-backed securities (“CMBS”) and residential mortgage-backed securities
(“RMBS”), making them more sensitive to changes in interest rates (referred to
as extension risk). As a result, in a period of rising interest rates, the price
of mortgage-backed securities may fall, causing the Fund to exhibit additional
volatility. Mortgage-backed securities are also subject to prepayment risk. When
interest rates decline, borrowers may pay off their mortgages sooner than
expected. This can reduce the Fund’s returns because the Fund will have to
reinvest that money at lower prevailing interest rates. In addition to extension
risk and prepayment risk, investments in mortgage-backed securities, including
those comprised of subprime mortgages, may be subject to a higher degree of
credit risk, valuation risk, and liquidity risk than various other types of
fixed-income securities. Non‑agency issued mortgage-backed securities are not
backed by the full faith and credit of the U.S. Government and must rely only on
the creditworthiness of the issuer and the underlying mortgages for
repayment.
CMBS
are subject to certain other risks. The market for CMBS developed more recently
than that for RMBS and is relatively small in terms of outstanding principal
amount of issues compared to the RMBS market. CMBS are also subject to risks
associated with a lack of standardized terms, shorter maturities than
residential mortgage loans, and payment of all or
19½Janus Detroit Street Trust
substantially
all of the principal at maturity, rather than regular amortization of principal.
Moreover, the type and use of a particular commercial property may add to the
risk of CMBS investments. Adverse changes in economic conditions and
circumstances are more likely to have an adverse impact on mortgage-backed
securities secured by loans on commercial properties than on those secured by
residential properties.
Similarly,
the value of the Fund’s 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. In addition, most asset-backed securities are
subject to prepayment risk in a declining interest rate environment. 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.
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 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.
Reverse Repurchase
Agreement Risk. Reverse repurchase
agreements are transactions in which the Fund sells a security and
simultaneously commits to repurchase that security from the buyer, such as a
bank or broker-dealer, at an agreed upon price on an agreed upon future date.
The repurchase price consists of the sale price plus an incremental amount
reflecting the interest cost to the Fund on the proceeds it has received from
the initial sale. Reverse repurchase agreements involve the risk that the value
of securities that the Fund is obligated to repurchase under the agreement may
decline below the repurchase price. Additionally, such transactions are only
advantageous if the interest cost to the Fund of the reverse repurchase
transaction is less than the cost of obtaining the cash otherwise. Interest
costs on the proceeds received in a reverse repurchase agreement may exceed the
return received on the investments made by the Fund with those proceeds,
resulting in reduced returns to shareholders. When the Fund enters into a
reverse repurchase agreement, it is subject to the risk that the buyer
(counterparty) may default on its obligations to the Fund. In the event of such
a default, the Fund may experience delays, costs, and losses, all of which may
reduce returns to shareholders. Investing reverse repurchase proceeds may also
have a leveraging effect on the Fund’s portfolio. The Fund’s use of leverage can
magnify the effect of any gains or losses, causing the Fund to be more volatile
than if it had not been leveraged. There is no assurance that any leveraging
strategy used by the Fund will be successful.
Rule 144A Securities
Risk. The Fund may invest in Rule 144A securities that
are not registered for sale to the general public under the Securities Act of
1933, as amended (the “Securities Act”), but which may be resold to certain
institutional investors.
20½Janus Detroit Street Trust
Such
securities may be determined to be liquid in accordance with the requirements of
Rule 22e‑4, under the Investment Company Act of 1940, as amended (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.
Structured Note
Risk. Structured notes are derivative debt instruments,
the interest rate or principal of which is determined by an unrelated indicator
(for example, a currency, security, commodity or index thereof). The terms of
the instrument may be “structured” by the purchaser and the borrower issuing the
note. The terms of structured notes may provide that in certain circumstances no
principal is due at maturity, which may result in a loss of invested capital.
Structured notes may be positively or negatively indexed, so that appreciation
of the unrelated indicator may produce an increase or a decrease in the interest
rate or the value of the structured note at maturity may be calculated as a
specified multiple of the change in the value of the unrelated indicator.
Therefore, the value of such notes may be very volatile. Structured notes may
entail a greater degree of market risk than other types of debt securities
because the investor bears the risk of the unrelated indicator. Structured notes
also may be more volatile, less liquid, and more difficult to accurately price
than less complex securities and instruments or more traditional debt
securities.
TBA Commitments
Risk. The Fund
will typically enter into “to be announced” or “TBA” commitments for
mortgage-backed securities and, at times, the portion of the Fund’s portfolio
allocated to TBA securities may be significant. Although the particular TBA
securities must meet industry-accepted “good delivery” standards, there can be
no assurance that a security purchased on a forward commitment basis will
ultimately be issued or delivered by the counterparty. During the settlement
period, the Fund will still bear the risk of any decline in the value of the
security to be delivered. Because TBA commitments do not require the purchase
and sale of identical securities, the characteristics of the security delivered
to the Fund may be less favorable than the security delivered to the dealer. If
the counterparty to a transaction fails to deliver the securities, the Fund
could suffer a loss. At the time of its acquisition, a TBA security may be
valued at less than the purchase price. When the Fund sells a TBA security prior
to settlement, it does not participate in future gains or losses with respect to
the security. The Fund is generally not required to pay for the TBA security
until the settlement date and, as a result, if the Fund remains substantially
fully invested at a time when TBA commitment purchases are outstanding, the
purchases may result in a form of leverage. To facilitate these TBA commitments,
the Fund is required to segregate or otherwise earmark liquid assets marked to
market daily in an amount at least equal to such TBA commitments.
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
Adviser has received an exemptive order from the SEC that permits the Adviser,
subject to the approval of the Trustees, to appoint or replace certain
subadvisers to manage all or a portion of the Fund’s assets and enter into,
amend, or terminate a subadvisory agreement with certain subadvisers without
obtaining shareholder approval (a “manager‑of‑managers structure”). The
manager‑of‑managers structure applies to subadvisers that are not affiliated
with the Trust or the Adviser (“non‑affiliated subadvisers”), as well as any
subadviser that is an indirect or direct “wholly-owned subsidiary” (as such term
is defined by the 1940 Act) of the Adviser or of another company that,
indirectly or directly, wholly owns the Adviser (collectively, “wholly-owned
subadvisers”).
Pursuant
to the order, the Adviser, with the approval of the Trustees, has the discretion
to terminate any subadviser and allocate and reallocate the Fund’s assets among
the Adviser and any other non‑affiliated subadvisers or wholly-owned subadvisers
(including terminating a non‑affiliated subadviser and replacing it with a
wholly-owned subadviser). The Adviser, subject to oversight and supervision by
the Trustees, has responsibility to oversee any subadviser to the Fund and to
recommend for approval by the Trustees, the hiring, termination, and replacement
of subadvisers for the Fund. The order 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 Mortgage-Backed Securities ETF |
|
$0‑$500 million |
|
|
0.30 |
|
|
|
Next $500 million |
|
|
0.25 |
|
|
|
Over
$1 billion |
|
|
0.20 |
|
22½Janus Detroit Street Trust
The
chart below shows the Fund’s hypothetical, blended fee rate based on the Fund’s
daily net assets at varying asset levels.
|
|
|
Fund Assets |
|
Effective Blended Rate Management Fee (%) (annual
rate) |
$500 million |
|
0.300 |
$750 million |
|
0.283 |
$1.0 billion |
|
0.275 |
$1.25 billion |
|
0.260 |
$1.5 billion |
|
0.250 |
$2.0 billion |
|
0.238 |
$2.5 billion |
|
0.230 |
$3.0 billion |
|
0.225 |
$4.0 billion |
|
0.219 |
$5.0 billion |
|
0.215 |
$6.0 billion |
|
0.213 |
For
the fiscal year ended October 31, 2021, the aggregate fee paid to the
Adviser, as a percentage of average net assets, was 0.28%. 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.
Expense
Limitation
The
Adviser has contractually agreed to waive and/or reimburse the management fee
payable by the Fund in an amount equal to the amount, if any, that the Fund’s
total annual fund operating expenses (excluding distribution fees (if any),
brokerage expenses or commissions, interest, dividends, taxes, litigation
expenses, acquired fund fees and expenses (if any), and other extraordinary
expenses not incurred in the ordinary course of the Fund’s business) exceed the
annual rate shown below. The Adviser has agreed to continue the waiver for at
least the period from February 28, 2022 through February 28,
2023.
|
|
|
|
|
Fund Name |
|
Expense Limit Percentage (%) |
|
Janus
Henderson Mortgage-Backed Securities ETF |
|
|
0.28 |
|
The
Adviser has also 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 Mortgage-Backed Securities 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 Janus
Henderson Mortgage-Backed Securities ETF, 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.
23½Janus Detroit Street Trust
Nick
Childs, CFA, is Co‑Portfolio Manager of Janus Henderson
Mortgage-Backed Securities ETF, 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 MBS, 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.
24½Janus 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.
25½Janus 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
26½Janus Detroit Street Trust
or
before February 15 of each year. Information regarding distributions may
also be reported to the Internal Revenue Service (“IRS”).
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.
27½Janus 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 JMBS. 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 shares of 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
(“12b‑1 fee”) 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. However, payment
of a 12b‑1 fee has not been authorized at this time.
28½Janus 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.
29½Janus 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.
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. 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.
30½Janus Detroit Street Trust
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.
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.
Share
Prices
The
trading prices of the Fund’s shares in the secondary market generally differ
from the Fund’s daily NAV per share and are affected by market forces such as
supply and demand, economic conditions, and other factors. Information regarding
the intra‑day net asset value of the Fund is disseminated every 15 seconds
throughout the trading day by the national securities exchange on which the
Fund’s shares are primarily listed or by market data vendors or other
information providers. The intra‑day net asset value calculations are estimates
of the value of the Fund’s net asset value per Fund share based on the current
market value of the securities and/or cash included in the Fund’s intra‑day net
asset value basket, using market data converted into U.S. dollars at the current
currency rates. The intra‑day net asset value does not necessarily reflect the
precise composition of the current portfolio of securities and instruments held
by the Fund at particular point in time. Additionally, when current pricing is
not available for certain portfolio securities (including foreign securities and
certain debt securities), the intra‑day indicative value may not accurately
reflect the current market value of the Fund’s shares or the best possible
valuation of the current portfolio. For example, the intra‑day net asset value
is based on quotes and closing prices from the securities’ local market and may
not reflect events that occur subsequent to the local market’s close. Therefore,
the intra‑day net asset value should not be viewed as a “real-time” update of
the NAV, which is computed only once a day. The intra‑day net asset value is
generally determined by using both current market quotations and/or price
quotations obtained from broker-dealers that may
31½Janus Detroit Street Trust
trade
in the portfolio securities and instruments included in the Fund’s intra‑day net
asset value basket. The Fund is not involved in, or responsible for, the
calculation or dissemination of the intra‑day net asset value and makes no
representation or warranty as to its accuracy. An inaccuracy in the intra‑day
net asset value could result from various factors, including the difficulty of
pricing portfolio instruments on an intra‑day basis.
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
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.
Under
the 1940 Act, purchases or acquisitions by the Fund of shares issued by
registered investment companies (including other ETFs) and business development
companies (“BDCs”) and the purchase or acquisition of Fund shares by registered
investment companies, BDCs, and investment vehicles 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, except where an exemption is available, including as
provided in Sections 12(d)(1)(F) and (G) and Rule 12d1-4 thereunder. Rule 12d1-4
permits registered investment companies and BDCs 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 or BDC first enter into a
written agreement with the Trust regarding the terms of the investment, among
other conditions.
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 APs, 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
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 APs 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
32½Janus Detroit Street Trust
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.
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.
33½Janus 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 shown
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 year or period ended October 31 |
|
2021 |
|
|
2020 |
|
|
2019 |
|
|
2018(1) |
|
Net
Asset Value, Beginning of Period |
|
|
$53.58 |
|
|
|
$52.62 |
|
|
|
$49.53 |
|
|
|
$50.00 |
|
|
|
|
|
|
Income/(Loss) from Investment
Operations: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
investment income/(loss)(2) |
|
|
0.66 |
|
|
|
1.22 |
|
|
|
1.56 |
|
|
|
0.17 |
|
Net
realized and unrealized gain/(loss) |
|
|
(0.19) |
|
|
|
1.51 |
|
|
|
3.03 |
|
|
|
(0.64) |
|
Total
from Investment Operations |
|
|
0.47 |
|
|
|
2.73 |
|
|
|
4.59 |
|
|
|
(0.47) |
|
|
|
|
|
|
Less Dividends and
Distributions: |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dividends
(from net investment income) |
|
|
(1.00) |
|
|
|
(1.77) |
|
|
|
(1.50) |
|
|
|
— |
|
Distributions
(from capital gains) |
|
|
(0.11) |
|
|
|
— |
|
|
|
— |
|
|
|
— |
|
Total
Dividends and Distributions |
|
|
(1.11) |
|
|
|
(1.77) |
|
|
|
(1.50) |
|
|
|
— |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net
Asset Value, End of Period |
|
|
$52.94 |
|
|
|
$53.58 |
|
|
|
$52.62 |
|
|
|
$49.53 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total
Return* |
|
|
0.88% |
|
|
|
5.30% |
(3) |
|
|
9.40% |
(3) |
|
|
(0.94)% |
|
Net
assets, End of Period (in thousands) |
|
|
$848,374 |
|
|
|
$578,645 |
|
|
|
$168,381 |
|
|
|
$32,193 |
|
Average
Net Assets for the Period (in thousands) |
|
|
$712,596 |
|
|
|
$369,845 |
|
|
|
$78,797 |
|
|
|
$30,452 |
|
Ratios
to Average Net Assets** |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Ratio
of Gross Expenses |
|
|
0.28% |
|
|
|
0.32% |
|
|
|
0.35% |
|
|
|
0.35% |
|
Ratio
of Net Investment Income/(Loss) |
|
|
1.24% |
|
|
|
2.31% |
|
|
|
3.05% |
|
|
|
2.67% |
|
Portfolio
Turnover Rate(4)(5) |
|
|
162% |
|
|
|
300% |
|
|
|
348% |
|
|
|
91% |
|
* |
Total
return not annualized for periods of less than one full
year. |
** |
Annualized
for periods of less than one full year. |
(1) |
Period
from September 12, 2018 (commencement of operations) through
October 31, 2018. |
(2) |
Per
share amounts are calculated based on average shares outstanding during
the year or period. |
(3) |
The
return includes adjustments in accordance with generally accepted
accounting principles required at period end
date. |
(4) |
Portfolio
turnover rate excludes securities received or delivered from in‑kind
processing of creation or redemptions. |
(5) |
Portfolio
Turnover Rate excludes TBA (to be announced) purchase and sales
commitments. |
34½Janus 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.
Preferred
stocks are equity securities that generally pay dividends at a
specified rate and have preference over common stock in the payment of dividends
and liquidation. Preferred stock generally does not carry voting rights.
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.
Certificates of
Participation (“COPs”) are certificates representing an interest
in a pool of securities. Holders are entitled to a proportionate interest in the
underlying securities. Municipal lease obligations are often sold in the form of
COPs. Refer to “Municipal lease obligations” below.
Collateralized
Mortgage Obligations (“CMOs”) are a type of mortgage-backed
security that are created by dividing the principal and interest payments
collected on a pool of mortgages into several revenue streams (tranches) with
different priority rights to portions of the underlying mortgage payments.
Certain CMO tranches are frequently referred to as “mortgage derivatives” and
may be extremely sensitive to changes in interest rates.
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 “1933 Act”).
Credit risk transfer
securities are unguaranteed and unsecured mortgage related
securities issued by a government-related organization or SPV, respectively, and
therefore are not directly linked to or backed by the underlying mortgage loans.
Unlike mortgage-backed securities, investors in CRT securities issued by a
government-related organization have no recourse to the underlying mortgage
loans. In addition, some or all of the mortgage default risk associated with the
underlying mortgage loans is transferred to the noteholder. Therefore, the Fund
could lose all or part of its investments in CRT securities in the event of a
default by the underlying mortgages. Refer to “Mortgage and asset backed
securities” above.
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.
Depositary receipts
are receipts for shares of a foreign-based corporation that
entitle the holder to dividends and capital gains on the underlying security.
Receipts include those issued by domestic banks (American Depositary Receipts),
foreign banks (Global or European Depositary Receipts), and broker-dealers
(depositary shares).
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.
35½Janus Detroit Street Trust
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.
High-yield/high-risk
bonds are bonds that are rated below investment grade by the
primary rating agencies (i.e., BB+ or lower by Standard & Poor’s and
Fitch, or Ba or lower by Moody’s). Other terms commonly used to describe such
bonds include “lower rated bonds,” “non‑investment grade bonds,” and “junk
bonds.”
Industrial
development bonds are revenue bonds that are issued by a public
authority but which may be backed only by the credit and security of a private
issuer and may involve greater credit risk. Refer to “Municipal securities”
below.
Mortgage- and
asset-backed securities are shares in a pool of mortgages or other
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 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 a Fund’s returns.
Mortgage dollar rolls
are transactions in which the Fund sells a mortgage-related
security, such as a security issued by Government National Mortgage Association,
to a dealer and simultaneously agrees to purchase a similar security (but not
the same security) in the future at a predetermined price. A “dollar roll” can
be viewed as a collateralized borrowing in which the Fund pledges a
mortgage-related security to a dealer to obtain cash.
Municipal lease
obligations are revenue bonds backed by leases or installment
purchase contracts for property or equipment. Lease obligations may not be
backed by the issuing municipality’s credit and may involve risks not normally
associated with general obligation bonds and other revenue bonds. For example,
their interest may become taxable if the lease is assigned and the holders may
incur losses if the issuer does not appropriate funds for the lease payments on
an annual basis, which may result in termination of the lease and possible
default.
Municipal securities
are bonds or notes issued by a U.S. state or political
subdivision. A municipal security may be a general obligation backed by the full
faith and credit (i.e., the borrowing and taxing power) of a municipality or a
revenue obligation paid out of the revenues of a designated project, facility,
or revenue source.
Pass-through
securities are shares or certificates of interest in a pool of
debt obligations that have been repackaged by an intermediary, such as a bank or
broker-dealer.
Passive foreign
investment companies (“PFICs”) are any foreign corporations which
generate certain amounts of passive income or hold certain amounts of assets for
the production of passive income. Passive income includes dividends, interest,
royalties, rents, and annuities. To avoid taxes and interest that the Fund must
pay if these investments are profitable, the Fund may make various elections
permitted by the tax laws. These elections could require that the Fund recognize
taxable income, which in turn must be distributed, before the securities are
sold and before cash is received to pay the distributions.
Pay‑in‑kind bonds
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.
Rule 144A securities
are securities that are not registered for sale to the general
public under the 1933 Act, but that may be resold to certain institutional
investors.
Standby commitment
is a right to sell a specified underlying security or securities
within a specified period of time and at an exercise price equal to the
amortized cost of the underlying security or securities plus accrued interest,
if any, at the time of exercise, that may be sold, transferred, or assigned only
with the underlying security or securities. A standby commitment entitles the
holder to receive same day settlement, and will be considered to be from the
party to whom the investment company will look for payment of the exercise
price.
36½Janus Detroit Street Trust
Step coupon bonds
are high-quality issues with above-market interest rates and a
coupon that increases over the life of the bond. They may pay monthly,
semiannual, or annual interest payments. On the date of each coupon payment, the
issuer decides whether to call the bond at par, or whether to extend it until
the next payment date at the new coupon rate.
Strip bonds
are debt securities that are stripped of their interest (usually
by a financial intermediary) after the securities are issued. The market value
of these securities generally fluctuates more in response to changes in interest
rates than interest-paying securities of comparable maturity.
Tender option bonds
are relatively long-term bonds that are coupled with the option to
tender the securities to a bank, broker-dealer, or other financial institution
at periodic intervals and receive the face value of the bond. This investment
structure is commonly used as a means of enhancing a security’s liquidity.
“To be announced” or
“TBA” commitments are forward agreements for the purchase or sale
of securities, including mortgage-backed securities, for a fixed price, with
payment and delivery on an agreed upon future settlement date. The specific
securities to be delivered are not identified at the trade date. However,
delivered securities must meet specified terms, including issuer, rate, and
mortgage terms. At the time the TBA commitment is made, the transaction is
recorded and thereafter the value of such securities is reflected each day in
determining the Fund’s net asset value (“NAV”). Because the Fund is generally
not required to pay for the security until the settlement date, if the Fund
remains substantially fully invested at a time when TBA commitment purchases are
outstanding, the purchases may result in a form of leverage. To facilitate these
TBA commitments, the Fund is required to segregate or otherwise earmark liquid
assets marked to market daily in an amount at least equal to such TBA
commitments.
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 GSEs. 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.
Warrants
are securities, typically issued with preferred stock or bonds,
which give the holder the right to buy a proportionate amount of common stock at
a specified price. The specified price is usually higher than the market price
at the time of issuance of the warrant. The right may last for a period of years
or indefinitely.
Zero coupon bonds
are debt obligations that do not pay regular cash interest
payments at regular intervals, but are issued at a discount from face value. The
discount approximates the total amount of interest the security will accrue from
the date of issuance to maturity. The market value of these securities generally
fluctuates more in response to changes in interest rates than interest-paying
securities.
|
FUTURES, OPTIONS, AND OTHER DERIVATIVES |
Credit default swaps
are a specific kind of counterparty agreement that allows the
transfer of third party credit risk from one party to the other. One party in
the swap is a lender and faces credit risk from a third party, and the
counterparty in the credit default swap
agrees to insure this risk in exchange for regular periodic payments.
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 for
investment purposes or to hedge against declines in the value of
securities
37½Janus Detroit Street Trust
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. It
may also enter into forward contracts to purchase or sell securities or other
financial indices.
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,
equity, or fixed-income securities. The Fund may also buy options on futures
contracts. An option on a futures contract gives the buyer the right, but not
the obligation, to buy or sell a futures contract at a specified price on or
before a specified date. Futures contracts and options on futures are
standardized and traded on designated exchanges.
Indexed/structured
securities are typically short- to intermediate-term debt
securities whose value at maturity or interest rate is linked to currencies,
interest rates, equity securities, indices, commodity prices, or other financial
indicators. Such securities may be positively or negatively indexed (e.g., their
value may increase or decrease if the reference index or instrument
appreciates). Indexed/structured securities may have return characteristics
similar to direct investments in the underlying instruments and may be more
volatile than the underlying instruments. The Fund bears the market risk of an
investment in the underlying instruments, as well as the credit risk of the
issuer.
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).
Options
are the right, but not the obligation, to buy or sell a specified
amount of securities or other assets on or before a fixed date at a
predetermined price. The Fund may purchase and write put and call options on
securities, securities indices, and foreign currencies. The Fund may purchase or
write such options individually or in combination.
Participatory notes
are derivative securities which are linked to the performance of
an underlying Indian security and which allow investors to gain market exposure
to Indian securities without trading directly in the local Indian market.
Total return swaps
involve an exchange by two parties in which one party makes
payments based on a set rate, either fixed or variable, while the other party
makes payments based on the return of an underlying asset, which includes both
the income it generates and any capital gains over the payment period. A
fixed-income total return swap may be written on many different kinds of
underlying reference assets, and may include different indices for various kinds
of debt securities (e.g., U.S. investment grade bonds, high-yield bonds, or
emerging market bonds).
|
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
cash management pooled investment vehicles that operate pursuant to the
provisions of the Investment Company Act of 1940, as amended (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 Investment Company
Act of 1940, as amended (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.
Leverage
occurs when the Fund increases its assets available for investment
using reverse repurchase agreements or other similar transactions. In addition,
other investment techniques, such as short sales and certain derivative
transactions, can create a leveraging effect. Engaging in transactions using
leverage or those having a leveraging effect subjects the Fund to certain risks.
Leverage can magnify the effect of any gains or losses, causing the Fund to be
more volatile than if it had not been leveraged. Certain commodity-linked
derivative investments may subject the Fund to leveraged market exposure to
commodities. In
38½Janus Detroit Street Trust
addition,
the Fund’s assets that are used as collateral to secure short sale transactions
may decrease in value while the short positions are outstanding, which may force
the Fund to use its other assets to increase collateral. There is no assurance
that a leveraging strategy will be successful.
Market capitalization
is the most commonly used measure of the size and value of a
company. It is computed by multiplying the current market price of a share of
the company’s stock by the total number of its shares outstanding. Market
capitalization is an important investment criterion for certain funds, while
others do not emphasize investments in companies of any particular size.
Net long
is a term used to describe when the Fund’s assets committed to
long positions exceed those committed to short positions.
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.
Reverse repurchase
agreements involve the sale of a security by the Fund to another
party (generally a bank or dealer) in return for cash and an agreement by the
Fund to buy the security back at a specified price and time. This technique may
be used for investment purposes, which may have a leveraging effect on the
Fund’s portfolio. This technique may also be used for other temporary or
emergency purposes.
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.
39½Janus 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. |
40½Janus 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. |
41½Janus Detroit Street Trust
|
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. |
Unrated
securities will be treated as non‑investment grade securities unless the
portfolio managers determine 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.
42½Janus Detroit Street Trust
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45½Janus 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 Funds 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.