Janus Henderson Short-Term Bond Fund name change

Comments

• msf

  September 2021

  This name change would concern me if I held the fund (JNSTX).
  
  The SEC says: "The Division takes the position that a 'short-term' ... bond fund should have a dollar-weighted average maturity of ... no more than 3 years."
  https://www.sec.gov/divisions/investment/guidance/rule35d-1faq.htm
  
  That doesn't apply to short duration funds. Floating rate securities are considered to have virtually zero duration, since their interest rate is generally set to match the market rate. That is, no interest rate sensitivity. But the securities themselves can have long maturities and may be illiquid.
  
  If they have embedded options, like mortgages, they may have extension risk. To the extent that their rates don't adjust quickly or completely to market changes, they may have negative convexity - as rates go up (and bond prices fall), their prices may fall much faster than vanilla bonds with positive convexity.
  
  What the prospectus says is that

  The Fund expects to maintain an average-weighted effective maturity of three years or less under normal circumstances. ... "Effective" maturity differs from actual maturity, which may be longer. In calculating the “effective” maturity the portfolio managers will estimate the effect of expected principal payments and call provisions on securities held in the portfolio. ...[A]ll else being equal, [this] could result in more volatility than if the Fund calculated an actual maturity target.
  ...
  Extension risk is the risk that borrowers may pay off their debt obligations more slowly in times of rising interest rates, which will lengthen the duration of the portfolio. 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.

  https://connect.rightprospectus.com/janushenderson/TADF/47103E742/P?site=janushenderson