This article first appeared in Wealth, The Edge Malaysia Weekly on June 26, 2023 - July 2, 2023
Janus Henderson Investors, a London-based global fund house with US$380 billion (RM1.7 trillion) in assets under management (AUM), plans to strengthen its position in the local market by offering unique products that suit investors’ needs.
Its chief financial officer Roger Thompson visited Malaysia in May to better understand the local market by speaking to banks and institutional investors.
“Part of my trip here is to understand the market and let people know that we are serious about it. We are looking to do more [in Malaysia and Asia],” he says.
“We are investing in the region, in both our sales and sales support teams. We are bringing in investment specialists from the US and London to make sure we can service the local market.”
Some people may not know that Janus Henderson has been in Malaysia for almost two decades, distributing its products through local fund houses. A notable product is the Janus Henderson Horizon Fund — Global Technology Leaders Fund, distributed under the TA Global Technology Fund, a feeder fund.
As at March 31, the Janus Henderson Horizon Fund — Global Technology Leaders Fund had generated a cumulative and annualised return of 79.88% and 22.46% respectively over the past five years, based on its fund fact sheet. Its top five holdings were Microsoft (9.5%), Apple (5.1%), Nvidia (5%), Alphabet (4.5%) and Taiwan Semiconductor Manufacturing (3.5%).
In total, there are eight funds managed by Janus Henderson being distributed in Malaysia through local fund houses, according to Thompson.
The firm has established its presence in Asia for almost three decades. But the region only accounted for about 1.3% of its total AUM, or about US$5 billion, excluding Australia and Japan.
“It should have been a very different figure [for Asia]. We have a specific initiative that the company and its board have agreed upon, which is to grow our business in Asia substantially in the next few years,” says Thompson.
New products in the pipeline
By leveraging its solid track record, Janus Henderson is aiming to distribute another technology fund in the local market based on sustainability and shariah principles.
Sustainability funds, otherwise known as ESG (environmental, social and governance) funds, are seeing high demand in the European Union, says Thompson. “In Malaysia, investors are looking for products that are a combination of ESG and shariah-compliant.”
He notes that the firm is widely known as an equity fund manager in Malaysia, but it actually has a sizeable fixed income business with about US$70 billion under management. The firm recently ventured into the emerging market debt space by raising US$1.5 billion from investors.
Within the fixed income space, investors are increasingly looking at the private credit space. Thompson says the private credit space grew out of the 2008 global financial crisis, when fund houses stepped in to provide private businesses with funds after banks took a step back. A similar situation, though to a much lesser extent, has been happening recently, providing fund managers with investment opportunities in the private credit market.
“The biggest part of this is what they call middle market direct lending. They could be special situation funds, distressed debt funds or others. Private credit includes quite a broad range of investment strategies,” he says.
Based on online information, the middle market in the US refers to businesses with an annual revenue of US$10 million to US$1 billion.
Meanwhile, Alex Ng, Janus Henderson’s head of intermediary sales for Asia-Pacific ex-Japan, says the firm is looking to “find a new home” for some of its flagship funds. One of them is the Horizon Biotechnology Fund that has generated attractive returns in recent years, he adds.
As at April 30, the fund had generated an annualised return of 15.76% over the past three years. In the past 12 months, it was up an impressive 35.59%. Its top three holdings are Argenx (5.04%), Sarepta Therapeutics (4.46%) and Vertex Pharmaceuticals (3.97%).
Argenx focuses on the development of human antibodies and is publicly listed in the Netherlands, while Nasdaq-listed Sarepta Therapeutics’ core business is genetic treatments for rare diseases. Vertex Pharmaceuticals, also listed on the Nasdaq, specialises in cystic fibrosis R&D and produces multiple approved medicines that treat the underlying cause of the disease.
Ng adds that the firm’s healthcare funds are suitable for investors despite a volatile market and a possible recession in the later part of the year as the demand for healthcare should remain relatively stable.
An active fund manager focuses on performance
The overall strategy of Janus Henderson is to continue positioning itself as an active fund manager that strives to outperform its benchmarks and peers, says Thompson.
Active investing works particularly well in a volatile market as it provides fund managers with opportunities to buy into fundamentally solid companies that are undervalued when markets are down. Index-tracking passive funds, such as exchange-traded funds (ETFs), may not do well when the broader markets go south, he points out.
“We believe in a few things, one of which is to listen to our clients to understand their needs. The second is being an active investor,” says Thompson.
“We fundamentally believe that over a long period of time, we can show through the numbers that about 85% of our assets beat their benchmarks over a 10-year period. While we have evolved with the market, one thing we are truthful to is to manage funds in an active way.”
Big firms well prepared for potential recession
Roger Thompson, chief financial officer at Janus Henderson Investors, says companies in general are in a good position to face a potential economic recession later this year. His observation is based on the firm’s Global Dividend Index, a quarterly report on a long-term study on global dividend trends that analyses the dividends paid by the 1,200 largest firms by market capitalisation.
“Dividends paid by these companies have continued to increase. And when you look at the first quarter results [in the report], they are in a very good [financial] position, which is very different from previous cycles. If there is a clear path towards the tapering off of interest rate hikes, and that rates do not decrease dramatically, companies are in a strong position [to navigate through that],” says Thompson.
“At the moment, it is obviously difficult to know what’s going to happen [in the later part of the year]. But companies are well positioned [for a potential recession]. If you invest through this cycle, you could end up being positive.”
He adds that cash, valuation and how investors select companies matter moving forward.
For a long time, investors have been riding on momentum trades when asset prices were up on the back of quantitative easing and a low to zero interest rate environment. When cash was offering nothing, people piled their money into the markets. However, investors should note that the situation is dramatically different now with interest rates being much higher, and that cash comes with a much higher cost.
Save by subscribing to us for your print and/or digital copy.
P/S: The Edge is also available on Apple's App Store and Android's Google Play.