en-US Stable across acquisitions. Janus Henderson’s 2017 acquisition of Kapstream added additional research and trading resources to this already stable, experienced team. The team earns an Above Average People rating.
Australia-based Kapstream was an investment boutique founded by Nick Maroutsos and Kumar Palghat in 2006. In 2015, Janus purchased a 51% stake in the business, and following the Janus-Henderson merger, the firm exercised its option to purchase the remaining equity of Kapstream. Today, the legacy Kapstream team remains intact, though it is split between Sydney and Janus’ Newport Beach, California, offices.
This strategy is managed by Nick Maroutsos, Daniel Siluk, and Jason England. Maroutsos and Siluk worked alongside each other at Kapstream in Sydney prior to its acquisition by Janus in 2015 and have been managing absolute return strategies together since 2009. Siluk resides at the firm’s Sydney office, while Maroutsos now works out of Newport Beach. England, formerly at Pimco, was hired in 2017 as a portfolio manager and also works out of Newport Beach.
The team relies on nine other portfolio managers for input on this strategy and also benefits from additional trading and technology resources that became available through the merger, as well as an informal relationship with the core Janus Henderson securitized team. The team keeps the bulk of this portfolio in global investment-grade corporate credit. The fund can invest up to 70% in non-U.S. securities, and management has made liberal use of this segment. As of December 2019, 65% of the fund’s assets resided in non-U.S. exposure, well above the 15% median for the ultrashort bond category. Since the fund’s 2016 inception, the team has held a bias toward the United States and Australia, as those countries accounted for more than 65% of the fund combined. Other areas such as China (5.1%) and South Korea (4.5%) can heighten this fund’s sensitivity to emerging-markets volatility, but virtually all foreign-currency exposure is hedged back to the U.S. dollar.
As of December 2019, its exposure to corporates was just over 91%, well ahead of the category median of 35%. Further, the fund can invest up to 15% in both high-yield and emerging-markets bonds, though the team’s use of both has been measured. Its below-investment-grade exposure was just 1.1%, while emerging markets totaled just over 5%. As a result, the fund’s sensitivity to corporate credit and riskier markets may be higher than the typical peer’s. This team’s absolute return approach has few restraints versus its FTSE Treasury Bill 3-Month Index benchmark and focuses its efforts on a global opportunity set across sectors and issuers. Its macro-oriented framework is reasonable but does not provide a clear competitive advantage. The fund earns a Process Pillar rating of Average.
This team’s approach uses a global macro assessment where interest-rate views, central-bank policy, and country fundamentals are considered. The team segments the portfolio into two parts. The first is a core segment accounting for more than 90% of assets. It consists of short-dated, investment-grade securities diversified across country, sector, and maturity. The emphasis here is global corporate bonds, but the team also invests in government debt and securitized assets. Its fundamental research is standard and draws upon issuer cash flow analysis and relative value across sectors and issuers.
The second segment of the portfolio has typically been less than 5% of total assets. It’s intended to act as an additional source of return (through below-investment-grade securities) or hedge against hostile market scenarios (through derivatives or yield-curve positioning). As an ultrashort fund, its duration positioning is rather limited, ranging from zero to two years. This is a core holding. Core A conventional choice. Janus Henderson Short Duration Income ETF VNLA is a corporate-credit-focused ultrashort strategy managed by an experienced and stable investment team. However, its conventional process and short record limit its Morningstar Analyst Rating to Neutral.
This fund is managed by Nick Maroutsos, Jason England, and Daniel Siluk. Maroutsos also serves as Janus Henderson’s co-head of global bonds, a position he has held since 2018. Siluk operates from the Sydney location and he been working alongside Maroutsos since 2009. England joined the team in 2017 from Pimco, where he was focused on the firm’s global-bond strategies and joined Maroutsos in the Newport Beach, California, office. The managers benefit from an experienced roster of portfolio managers and analysts, as well as the quant tools and traders available to them at Janus Henderson.
This strategy’s process is sensible but lacks a competitive advantage. The process is born from the team’s macroeconomic assessment, which considers central-bank policy, yield-curve analysis, interest-rate path projections, and fundamental analysis of a country’s economic landscape. The team relies on issuer cash flow analysis and relative value assessments across sectors and industries for its bottom-up research. It’s a circumspect approach that checks the usual boxes for a global mandate.
The strategy’s penchant for credit extends beyond the typical ultrashort bond Morningstar Category peer; corporates make up more than 90% of this fund’s assets, versus a category median of 35%. It can invest up to 15% in both high-yield and emerging-markets debt, which could leave it vulnerable in adverse credit environments. However, the team’s use of junk-rated corporates has been modest, topping out at 5% since inception. Additionally, this fund will keep a large allocation to non-U.S. debt (63%), which far exceeds the ultrashort category median of 15%. Duration is tactically managed and ranges from zero to two years, standing at 1.2 years as of December 2019.
Mike Viola contributed to this report. 2139 2139 Connor Young Connor Young It’s been more than two years since the merger of Janus Capital Group and Henderson Group produced Janus Henderson Investors. The merger increased the investment capabilities, scope of distribution, and scale of the legacy firms. Janus Henderson had USD 356 billion in assets as of September 2019.
The combination has led to considerable change within in the organization, including a decision in July 2018 to choose legacy Janus CEO Dick Weil as the Janus Henderson leader, and substantive turnover in the equity and fixed-income portfolio-manager and analyst ranks. While analyst turnover has ebbed over the past two years, many analysts are still short-tenured. More recently, former head of global emerging markets Glen Finegan and four members of his team left in April 2019. Janus Henderson has brought on experienced investors to replace lost talent, including an emerging-markets team from Putnam in August 2019 to replace Finegan, et.al., and in January 2020 a head of U.S. fixed income from AllianceBernstein, with Darrell Watters, head of U.S. fundamental fixed income, retiring at year-end 2019. Still, it will take more time to tell if the legacy firms can coalesce their cultures and to consider the dust settled.
Positive initiatives include lowering fees on legacy Henderson funds and implementing global risk-management tools. On balance, Janus Henderson earns an Average Parent rating. Not quite yet settled. 2019-12-04T13:00:00 2019-12-04T19:00:00Z The ETF’s relatively short track record has been impressive. From its November 2016 inception through March 30, 2020, the strategy has beaten every one of its surviving 74 ultrashort bond category peers, surpassing the median return by almost 80 basis points. Despite a slightly riskier profile than many in the face of coronavirus concerns, it has also remained competitive with peers for the year to date, beating 70% of its competitors within the category through the end of March.
There are still environments where the fund has seen some downside. During the fourth quarter of 2018, amid a credit sell-off, the fund’s 0.4% return fell in the category’s worst quintile owing to the strategy’s unusually high allocation to corporate credit. This led it to trail the median return of its peer group by about 20 basis points that quarter, though it achieved a strong recovery in 2019 ahead of 92% of its peers. Though the fund’s relatively low usage of its emerging-markets allowance allowed the fund to stay in the top quintile of its category as such credits sold off in mid-2018, similar scenarios in the future could hurt if the team reaches closer to the 15% ceiling on its emerging-markets budget. It’s critical to evaluate expenses, as they come directly out of returns. The share class on this report levies a fee that ranks in its Morningstar category’s second-cheapest quintile. Even so, based on our assessment of the fund’s People, Process and Parent pillars in the context of these fees, we don’t think this share class will be able to deliver positive alpha relative to the category benchmark index, explaining its Morningstar Analyst Rating of Neutral. F00000XK9G Live