JANUS HENDERSON HORIZON

STRATEGIC BOND FUND

Time to move beyond conventional thinking?

Janus Henderson Horizon Strategic Bond Fund — seeking to see the investment world for what it truly is

Time and time again predictions and consensual thinking are proven wrong. The COVID-era has accentuated strengths and weaknesses in business models and raised questions around monetary policy. John Pattullo and Jenna Barnard have long been sceptics of orthodox economic theory and unnecessary complexity — they instead seek to see the investment world for what it truly is. This mindset shapes their thematic approach to ‘high quality’ credit investing, which they have applied successfully for nearly two decades.

Why invest in this fund

Differentiated thinking

Differentiated
thinking

  • Courage to deviate from consensus to drive alpha
  • Identification of secular themes drives asset allocation
Broad toolkit capability

A ’different’ credit approach to ESG:

  • ESG considerations are embedded in our ‘sensible income’ philosophy
Performance and longevity

Performance and longevity

  • A consistent track record aiming to deliver strong performance with lower risk versus peers
Transparency and discipline

Transparency and discipline

  • We believe bonds should be boring; delivering relatively predictable outcomes from simple, understandable investments.
  • Regular insights and active communication enables investors to know what we know.
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Bond funds should be predictable, boring and provide sufficient diversification to the riskier parts of your portfolio

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John Patullo & Jenna Barnard,
co-Heads Stratgeic Fixed Income

Investment Philosophy

Janus Henderson Horizon Strategic Bond Fund is an unconstrained, fixed income portfolio sourcing the best opportunities throughout the economic cycle.

To provide a foundation for portfolio construction, the fund managers identify powerful secular themes that drive the asset allocation. The three core tenets of their strategy includes:

Morningstar Rating

    As of 31/08/2020

Past performance is not a guide to future performance. 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

1

Thematic Investing
 

A focus on the long-term structural factors driving bond markets; not orthodox economic models

2

Duration management
 

Aiming to generate successful returns by positioning against a consensus of higher bond yields

3

Disciplined credit selection
 

A focus on ‘high quality’ factor; we reject large parts of the credit market as too low quality

1

Thematic Investing

A different approach to bond market requires a different thinking. Our portfolio managers invest based upon market themes because we believe that different fixed income asset classes tend to perform better at different points in the economic cycle.

2

Duration management

Bond managers should not fear duration. Opportunities around duration management are often driven by the emotion of investors rather than actual changes in inflation or growth regimes.

Tactical duration management allows us to add alpha and minimise drawdown risk

3

Disciplined credit selection

Our investing strategy is guided by a ‘’ sensible income’’ principle, which seeks bonds from reliable issuers. This requires a full understanding of the risk -reward potential of a position by looking at the fundamentals supporting a security.

We believe part of the credit market is ‘’uninvestible’’ as too low quality

We believe parts of the credit market are
‘’uninvestible’’ being too low quality

Global HY Market $2.2 Tn

Developed World Only

$1.7 Tn

Preference for DM companies
Remove 23% of the index

“Sensible Income”

$1.3 Tn

Screen Airlines, Energy & Autos
Remove 19% of the index

Distressed Spreads

$1.2 Tn

Exclude bonds trading 600bp > index. Remove 2.5% of the index

Issue Size

$1.2 Tn

Exclude bond issue less than $250m
Remove ~1.1% of the index

ESG

$1.2 Tn

Remove companies on AVOID list
Remove ~0.3% of the index at this level

Global IG Market $12 Tn

Developed World Only

$11 Tn

Preference for DM companies
Remove 10% of the index

“Sensible Income”

$9 Tn

Screen Airlines, Energy & Autos
Remove 18% of the index

Distressed Spreads

$8 Tn

Exclude bonds trading 300bp > index. Remove 2.5% of the index

Issue Size

$8 Tn

Exclude bond issue less than $250m
Minimal removal of the index

ESG

$8 Tn

Remove companies on AVOID list
Minimal removal of the index

45% of Global HY
market is uninvestable

33% of Global IG
market is uninvestable

Our approach to ESG

ESG considerations are integral to our sensible income approach, which is in effect a ‘quality’ style bias, with ESG a critical feature whe screening for quality credit’’

Jenna Barnard
Co-Head Strategic Fixed Income

Our portfolio manager team, practice an approach to credit investing that diverges from the mainstream.

We believe the term ‘’sensible income’’ is a quality style bias, which filter out large parts of the credit market as ‘’too risky’ or ‘’low quality’’ for investments. Over time we have found that there is an overlap between sectors that fail to meet our definition of ‘’sensible income’’ and those that have weaker ESG profiles.

Why invest in this fund

Diversification

Diversification

Investors need to avoid a high level of correlation in their fixed income holdings. The differentiated thinking within this fund can make it a useful complement to core bond holdings.

Strategic allocation

Strategic allocation

Being able to move strategically between asset classes over the economic and credit cycle s should permit superior long-term risk-adjusted returns versus single sector bond funds.

Total return

Total return

Returns are generated through income (distributed quarterly on income shares) and potential capital growth. The asset mix typically offers a higher yield than developed market sovereign bonds.

Strategic Fixed Income team history

Helix

Launched Strategic Bond Fund UK OEIC

2003

AUM £3.0bn

Launched U.S. 40 Act Fund inherited

2009

AUM $1.6bn

Launched Horizon Strategic Bond Fund launch SICAV

2017

AUM $227m

Total team AUM as of 30 June 2020

2020

AUM $7.8bn

Source: Janus Henderson Investors, as of 30 June 2020

A strong track record

Proven experience managing Strategies through bull and bear markets.

The fund is part of a much larger strategic bond strategy (over $5.5 billion in size as at 30 June 2020), which the managers began running in 2003, first in the UK and later including the US. The fund manager, John Pattullo and Jenna Barnard, have been working together for over 17 years and their strategy has been tested through the cycles in a variety of market conditions (both bull and bear) including the Great Financial Crisis and, lately, the Covid 19 pandemic.

Meet the experts

Headshot-thumbnail_Jenna-Barnard

Jenna Barnard, CFA

Co-Head of Strategic Fixed
Income | Portfolio Manager

  • Industry since 2001
  • Joined Firm in 2002
John Pattullo | Janus Henderson Investors

John Pattullo, CFA

Co-Head of Strategic Fixed
Income | Portfolio Manager

  • Industry since 1993
  • Joined Firm in 1997

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We believe parts of the credit market are
‘’uninvestible’’ being too low quality