Michael John Lytle, CEO of Tabula, has said that further down the line the ETF market is “due for some disruption’”, much as ETFs have reshaped the traditional fund industry.
After acquiring fixed income specialist Tabula Investment Management in May this year, Janus Henderson launched the Janus Henderson Tabula Japan High Conviction Equity UCITS ETF (JCPN), marking its European debut.
Janus Henderson’s decision to launch a high conviction equity ETF is a more niche strategy in the active ETF space, though, more active managers are launching concentrated strategies.
Guinness AM is one example, making its European ETF debut by launching an active sustainable strategy holding 33 stocks in June.
Upon entering the European ETF market, Lytle (pictured) noted the space holds strong potential for future disruption, however added “I do not think the right thing to do is to get too far into the long grass in your first round of products.”
Why Japan first?
Lytle stated high conviction active strategies in the equity space are “compelling” in Europe.
“I think it speaks to Janus Henderson’s specific capabilities in areas where we have intellectual property that clients value and have encouraged us to expand. We saw this particular area as a promising opportunity,” he said.
Following the focus on Japanese equities for the first launch, Lytle said: “The team has a fantastic record and the space has been pummelled for a decade and a half.”
He highlighted Japan’s favourable position due to the yen’s currently low valuation relative to purchasing power parity, which hints at potential currency reversion. This potential currency shift, coupled with recent market volatility, has impacted market sentiment.
Lytle added, “The point that we make is that with a concentrated basket, it is much more about the views you have on the individual companies than it is about making a bet in MSCI Japan.”
No cannibalisation concerns
Fund selectors have previously pointed out JCPN is largely reminiscent of the UK-domiciled $100m Janus Henderson Japan Opportunities Fund.
When asked about its overlap of strategy to this new ETFs, Lytle said he does not see the launch as cannibalistic to the opportunities fund.
“Current buyers likely do not mind its move into an ETF structure. However, many international businesses in the UK prefer this setup, especially as we are passporting it to 15 countries and exploring LATAM and Asia for further reach.”
Future plans
Since Janus Henderson acquired Tabula, there has been speculation surrounding the asset manager bringing the Janus Henderson AAA CLO ETF (JAAA) to Europe.
On a potential launch, Lytle said “We are one of the largest and most successful structured credit managers, and we have a huge amount of work and effort that we have done to build internal databases that give us an edge in analysing product in the space.
“We would love to deliver that to clients in a variety of wrappers, if given the opportunity.”
More broadly, Lytle said the asset manager does not have any plans to launch a disruptive product in the next three months.
“But over the next three to five years the ETF market is due for some disrupting in the same way that it is disrupted the traditional fund space. It needs to keep disrupting to be relevant.”
