Capital Preservation in Uncertain Times: The Role of Defensive Equity Investing and the Janus Henderson AAA CLO ETF

In an era of persistent macroeconomic uncertainty-marked by inflationary pressures, geopolitical tensions, and the lingering effects of the post-pandemic recovery-capital preservation has become a paramount concern for investors. Defensive equity strategies, which prioritize stability and income generation over aggressive growth, are increasingly vital. Among the tools available, the Janus Henderson AAA CLO ETF (JAAA) stands out as a compelling vehicle for capital preservation, leveraging the unique characteristics of collateralized loan obligations (CLOs) to navigate turbulent markets.

The Case for Defensive Equity Investing

Defensive equity strategies focus on assets with low volatility, consistent cash flows, and limited downside risk. These strategies are particularly relevant in environments where traditional equities face headwinds. For instance, during the 2020 pandemic, global equity markets plummeted as lockdowns disrupted supply chains and consumer demand. Yet, as shown on the total return chart, the Janus Henderson AAA CLO ETF (JAAA) returned 0.79% in 2020, outperforming many equity benchmarks. This resilience stems from JAAA's focus on AAA-rated CLOs, which are structured to prioritize interest payments and minimize credit risk, according to the Janus Henderson product page.

CLOs, which pool leveraged corporate loans and issue tranches with varying risk profiles, have historically demonstrated durability during crises. For example, during the 2008 financial crisis, AAA-rated CLOs-though not yet packaged into ETFs like JAAA-remained largely intact, avoiding the defaults that plagued subprime mortgage-backed securities. While JAAA itself was not launched until 2020, its underlying asset class has a proven track record of withstanding economic shocks.

JAAA's Structure and Performance in 2025

As of 2025, JAAA has attracted $22.84 billion in assets under management, reflecting growing investor confidence in its strategy, according to a TradingNews profile. The ETF's focus on high-quality CLO tranches ensures minimal exposure to default risk, while its floating-rate structure insulates it from rising interest rates. This is particularly relevant in the current macroeconomic climate, where the Federal Reserve anticipates only two rate cuts in 2025.

The CLO market itself is poised for a "soft landing," with speculative-grade default rates projected to decline sharply. By October 2025, U.S. defaults are expected to fall to 2.6%, down from 5.6% in October 2024, while European defaults will drop to 2.7% from 3.3%, according to a Credaily brief. These trends are bolstered by a resilient labor market and inflation returning to the Fed's 2% target. Additionally, $117 billion in CLOs are set to exit non-call periods in 2025, creating opportunities for refinancing at favorable spreads.

JAAA's Dividend Yield and Portfolio Role

JAAA's appeal extends beyond capital preservation to income generation. With a trailing twelve-month dividend yield of 5.56% as of October 2025, according to StockInvest's dividend history, it outperforms traditional bond ETFs like AGG and LQD while maintaining low duration risk. Its monthly dividend payments provide a steady income stream, making it an attractive complement to equity portfolios during periods of heightened volatility.

However, investors must remain cognizant of potential risks. While JAAA's low correlation to equities enhances diversification, geopolitical uncertainties-such as conflicts in energy-producing regions or trade disputes-could indirectly impact corporate profits within CLO collateral pools. Nevertheless, the ETF's focus on high-grade tranches and its structural safeguards mitigate these risks.

Conclusion: A Strategic Asset for Uncertain Times

The Janus Henderson AAA CLO ETF exemplifies how defensive equity strategies can adapt to macroeconomic uncertainty. By leveraging the resilience of AAA-rated CLOs, JAAA offers a unique blend of capital preservation, income generation, and diversification. As 2025 unfolds, with its mix of soft-landing optimism and lingering risks, JAAA remains a compelling option for investors seeking to protect and grow their portfolios in turbulent markets.