Janus Henderson has launched a US equity ETF with a total expense ratio (TER) of 0%, entering the increasingly competitive market for low-cost passive investment products.
The Janus Henderson US Large Cap Equity Core UCITS ETF (J501) listed on the London Stock Exchange on 9 October and tracks the Solactive GBS United States 500 Index, providing exposure to 500 of the largest US companies.
The ETF uses synthetic replication, meaning it obtains exposure to the index through financial agreements known as total return swaps, rather than directly holding the underlying stocks. To do this it holds a portfolio of developed market equities and exchanges their returns with financial institutions in return for the performance of the Solactive GBS United States 500 Index.
Although the fund has a headline TER of 0%, Janus Henderson discloses a separate swap fee of 0.145%, meaning investors should not assume the ETF is entirely cost-free. The manager also receives contributions from swap counterparties equivalent to 0.08% of the fund’s net assets annually to help meet operating expenses, although it says these payments do not affect investor returns.
The launch marks a move into mainstream passive equity investing for Janus Henderson, whose expanding European ETF business has largely focused on actively managed strategies.
Our view
David Batchelor, senior analyst at QuotedData, said: “There is something striking about an established active manager launching a US equity ETF with a 0% headline fee. It underlines just how fiercely competitive the market for mainstream equity exposure has become, with providers increasingly having to find new ways to differentiate products in a segment where charges are already extremely low. For Janus Henderson, the launch also broadens its ETF offering beyond the active strategies that have driven its expansion in Europe.
However, the zero-fee headline deserves some scrutiny. The separate swap fee means the ETF is not quite the free investment that investors might initially imagine. Ultimately, what matters is the fund’s performance relative to its benchmark after all expenses, rather than its advertised TER. With rival US equity ETFs already available for just a few basis points annually, Janus Henderson will need to demonstrate that its structure delivers a genuine advantage, rather than simply an eye-catching headline.
