JAAA vs. CLOX: Choosing Between Yield and Stability in CLO ETFs

The CLO ETF space has grown increasingly competitive, with two key players—JAAA (Janus Henderson AAA CLO ETF) and CLOX (Panagram AAA CLO ETF)—attracting investor attention. Both focus on AAA-rated collateralized loan obligations (CLOs), but their approaches to risk, yield, and liquidity create stark contrasts. For investors weighing capital preservation against income generation, understanding these differences is critical.

Risk Metrics: Stability vs. Volatility

JAAA and CLOX diverge sharply in risk-adjusted performance, a key consideration in volatile markets. Let's start with the numbers:

JAAA's Sharpe Ratio of 3.30 in 2024 outpaces CLOX's 1.12, meaning it delivered superior returns per unit of total risk. This gap is even wider for the Sortino Ratio, which focuses on downside volatility: JAAA's 4.24 versus CLOX's 1.43. These metrics highlight JAAA's ability to protect capital during downturns.

Volatility data reinforces this: JAAA's daily standard deviation (1.80%) is less than a third of CLOX's (5.28%). Meanwhile, JAAA's maximum drawdown (-2.60%) is half the size of CLOX's (-4.13%).

In a rising rate environment, stability matters. Higher volatility (like CLOX's) can amplify losses during liquidity crunches or credit downgrades, while JAAA's low correlation to equities (+0.14 vs. the S&P 500's 12.6% volatility) offers diversification benefits.

Liquidity Considerations: Trading Volume and AUM

Liquidity is another dividing line. JAAA's $20 billion AUM as of early 2025 dwarfs CLOX's $151.7 million. This scale translates to deeper liquidity:

JAAA's average daily volume (not specified in the data but inferred from its AUM growth) likely exceeds CLOX's 7,569 shares. Low trading volume means CLOX could face wider bid-ask spreads during market stress, making it harder to exit positions without price slippage.

Yield and Cost Trade-offs

CLOX's appeal lies in its slightly higher dividend yield (5.72% vs. JAAA's 5.95%) and lower expense ratio (0.20% vs. 0.21%). However, these advantages are marginal compared to JAAA's risk profile. The 20 bps savings on fees pale against the potential for larger losses during market corrections.

Investor Suitability: Risk Tolerance is Key

• JAAA: Ideal for conservative investors prioritizing capital preservation. Its low volatility and robust risk metrics make it a safer choice for long-term portfolios, especially amid Fed policy uncertainty.
• CLOX: Targets income-focused investors with higher risk tolerance. The extra yield comes at the cost of greater drawdown risk, making it suitable only for those who can withstand short-term volatility.

Final Analysis: JAAA as the Safer Choice

While CLOX's yield edge might tempt income seekers, JAAA's superior risk-adjusted returns and liquidity make it the more prudent pick. In a rising rate environment, the lower correlation to equities and smaller drawdowns position JAAA to outperform during market turbulence.

Investors should remember: CLOs are inherently leveraged instruments. In a stress scenario, CLO ETFs with higher volatility (like CLOX) could underperform significantly. For most portfolios, JAAA's blend of yield and stability offers better risk-adjusted value.

Investment Takeaway:
- Choose JAAA if preserving capital and avoiding large losses is paramount.
- Consider CLOX cautiously only if you can afford downside risks for the sake of extra income—and monitor liquidity metrics closely.

In the CLO ETF race, JAAA is the clear leader in balancing yield with safety.