For financial professionals in the UK

Bucking the benchmark

Young girl is watching sunset over Tokyo
Laura Foll, CFA

Laura Foll, CFA

Portfolio Manager

James Henderson

James Henderson

Portfolio Manager

11 Oct 2021
9 minute read

Benchmarks fulfil a vital role in the world of investing. Firstly, they serve as a standard against which the performance of an investment can be measured relative others within the same peer group or category. Secondly, they guide investors regarding the broad investment strategy being pursued by the portfolio manager. They are essentially a guide for investors, therefore, rather than a shackle for managers on the basis that the primary objective for the manager is to outperform the benchmark rather than mirror it.

Sector Weightings
  All Share (%) HOT (%)
Financials 22.5 19.3
Consumer staples 15.0 0.9
Industrials 13.3 22.9
Consumer discretionary 12.4 16.8
Basic materials 9.3 6.5
Health care 9.7 4.4
Energy 7.2 10.5
Real Estate 3.3 1.1
Utilities 3.0 1.1
Telecommunications 2.2 2.1
Technology 2.0 14.5


Amongst the reasons for this divergence are to take advantage of the UK’s positive economic backdrop and rapidly changing investment landscape, whilst exposing investors to a diverse range of exciting opportunities across a broad range of sectors. In recent months, the managers have increased their exposure to financials which should benefit from the UK’s better-than-expected economic recovery. This has primarily been driven by the reopening of the economy following the successful rollout of Covid-19 vaccines and the release of pent-up consumer demand. Meanwhile, the exposure to industrials is to take advantage of the UK’s cyclical recovery and the rich seam of smaller companies within the sector.

Longer term, the managers are also considering the UK’s rapidly changing investment landscape, with the move towards decarbonisation a prime example. The transition to a low-carbon economy presents a significant opportunity to invest in a multi-year structural growth trend, while also helping to tackle an existential crisis. As a result, the Trust is overweight to the alternative energy sector, holding companies including AFC Energy, Ceres Power and ITM Power, which in James and Laura’s view, have the potential to be among the future market leaders in areas such as fuel cells and electrolysers.

In addition to the substantial sector divergence, the portfolio has significant exposure to small-cap stocks, particularly within the AIM market, as shown in the table below3. This differentiation from both the All-Share benchmark and the Trust’s peers has been one of the main drivers behind the Trust’s performance, with UK small-cap stocks outperforming their domestic large-cap peers over the last 12-months. This has largely been driven by the recovery in cyclical stocks – from last year’s covid-induced slump – as the UK economy has continued to reopen. Smaller companies tend to be more domestic in their exposure and more cyclical. Therefore, by investing across all sizes within the small-cap space, James and Laura are not only giving themselves greater choice in their stock selection, but they are also gaining diversification from exposure to a broader range of industries.

Portfolio weight (%) * Benchmark weight (%) Active weight vs. benchmark
Large cap 25.6 78.8 53.2
Mid cap 12.6 17.8 5.2
Small cap 7.9 3.4 4.5
Fledgling 0.0 0.0 0.0
AIM 62.2 0.0 62.2
Other listed 3.6 0.0 3.7
Source: Janus Henderson and Factset, as at 31.08.21
*excluding cash

To ensure that the Trust is exposed to a diverse range of growth and value drivers across the different market caps and sectors mentioned above; the managers utilise a ‘bucket’ or ‘sleeve’ approach to managing the portfolio – another key differentiator for the Trust. The portfolio is divided into seven classifications, each with an indicative exposure range (nonbeing larger than 40% of the total). The buckets are constructed as follows:

  • Small- and mid-cap compounders (20-40% of the portfolio): good quality, usually well-established companies with strong management teams, offering the potential for long-term compounding of returns as they grow earnings.
  • Growth small cap (20-40%): earlier-stage than the ‘compounders’, these are companies that are at an earlier stage of their life cycle with the potential for higher sales and earnings growth
  • Large cap (10-30%): familiar names that nevertheless offer operational quality and long-term growth potential; these can increase the liquidity of the overall portfolio and also pay, on average, a higher dividend yield
  • Early stage/university spinouts (0-20%): although these may be unproven and can be risky, their prospects are largely uncorrelated to market moves and they may offer significant commercial potential as assets are commercialised.
  • Natural resources (5-15%): positioning will depend on the commodity, but these cyclical stocks can add portfolio diversification.
  • Recovery (0-20%): contrarian value opportunities.
  • Special situations (0-10%): distinct from recovery stocks in that they offer a specific catalyst for change, such as a restructuring, rather than simply being out of favour.

The current portfolio exposure by ‘bucket’ is shown in the chart below3:

The managers believe this approach provides ‘true’ diversification; in that different ‘buckets’ may perform well in different market environments. This was evident last year as the managers rotated away from some early-stage companies that did well in 2020, to more recovery and natural resources names that could benefit from the reopening. While almost 60% of the portfolio is currently represented by early-stage AIM companies, the managers also take full advantage of the opportunities present within other buckets, which might mean a move up the market cap scale. The ‘Recovery’ bucket, for example, consists predominantly of more established older and/or larger businesses that are having to reinvent themselves due to the trends exacerbated by Covid-19. Marks & Spencer constitutes a good example; last year’s Ocado deal was instrumental in boosting its online presence in food.

The speed of change within the UK’s investment landscape means that some industries will continue to face disruption, while in other areas, large new companies will emerge. Some of the companies that are major constituents of the index today will be replaced by new generation companies. The speed of this change could be more rapid than in the past. Such an environment provides Laura and James – who are unconstrained by the benchmark – with significant opportunities to substantially add value over an index-oriented approach to portfolio management.




1 Source: FTSE Russell, FTSE All-Share Index factsheet, as at 30.07.21
2 Source: Janus Henderson and Factset, as at 31.08.21
3 Source: Janus Henderson and Factset, as at 31.08.21
4 Source: Janus Henderson, as at 21.09.21
5 Source: Henderson Opportunities Trust factsheet, as at 31.08.21 Cyclical Expand

Companies that sell discretionary consumer items, such as cars, or industries highly sensitive to changes in the economy, such as miners. The prices of equities and bonds issued by cyclical companies tend to be strongly affected by ups and downs in the overall economy, when compared to non-cyclical companies.

Contrarian Expand

An investment style that goes against market consensus or a conventional approach. Contrarian investors believe that crowd behaviour can lead to mispricing opportunities in financial markets.

Diversification Expand

A way of spreading risk by mixing different types of assets/asset classes in a portfolio. It is based on the assumption that the prices of the different assets will behave differently in a given scenario. Assets with low correlation should provide the most diversification.

Market capitalisation Expand

The total market value of a company’s issued shares. It is calculated by multiplying the number of shares in issue by the current price of the shares. The figure is used to determine a company’s size and is often abbreviated to ‘market cap’.

Net Asset Value (NAV) Expand

The total value of a fund’s assets less its liabilities.

Large cap stocks Expand

Larger companies as defined by market capitalisation total market value of a company calculated by multiplying the number of shares in issue by the current price of the shares) tend to be easily bought or sold in the market (highly liquid).

Volatility Expand

The rate and extent at which the price of a portfolio, security, or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. It is used as a measure of the riskiness of an investment.


Discrete year performance % change (updated quarterly) Share Price Nav
30/06/2020 to 30/06/2021 73.2 63.7
28/06/2019 to 30/06/2020 -16.8 -16.2
29/06/2018 to 28/06/2019 -7.1 -7.4
30/06/2017 to 29/06/2018 22.3 21.9
30/06/2016 to 30/06/2017 27.3 27.8
All performance, cumulative growth and annual growth data is sourced from Morningstar


These are the views of the author at the time of publication and may differ from the views of other individuals/teams at Janus Henderson Investors. References made to individual securities do not constitute a recommendation to buy, sell or hold any security, investment strategy or market sector, and should not be assumed to be profitable. Janus Henderson Investors, its affiliated advisor, or its employees, may have a position in the securities mentioned.


Past performance does not predict future returns. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.


The information in this article does not qualify as an investment recommendation.


Marketing Communication.






Important information

Please read the following important information regarding funds related to this article.

Before investing in an investment trust referred to in this document, you should satisfy yourself as to its suitability and the risks involved, you may wish to consult a financial adviser. This is a marketing communication. Please refer to the AIFMD Disclosure document and Annual Report of the AIF before making any final investment decisions.
    Specific risks
  • If a Company's portfolio is concentrated towards a particular country or geographical region, the investment carries greater risk than a portfolio that is diversified across more countries.
  • Some of the investments in this portfolio are in smaller company shares. They may be more difficult to buy and sell, and their share prices may fluctuate more than those of larger companies.
  • This Company is suitable to be used as one component of several within a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested in this Company.
  • Active management techniques that have worked well in normal market conditions could prove ineffective or negative for performance at other times.
  • The Company could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Company.
  • Shares can lose value rapidly, and typically involve higher risks than bonds or money market instruments. The value of your investment may fall as a result.
  • The return on your investment is directly related to the prevailing market price of the Company's shares, which will trade at a varying discount (or premium) relative to the value of the underlying assets of the Company. As a result, losses (or gains) may be higher or lower than those of the Company's assets.
  • The Company may use gearing (borrowing to invest) as part of its investment strategy. If the Company utilises its ability to gear, the profits and losses incurred by the Company can be greater than those of a Company that does not use gearing.