Monthly fund manager comment



Macro backdrop

January was an exceptional month for risk assets. US equities had a particularly strong month as the S&P 500 Index rose 5.7% (in US dollar terms), and retail inflows were strong as the market made new highs. The strength of this was attributed to the synchronised global earnings outlook, loose financial conditions, US fiscal tax reform, high activity and confidence indicators, and the weak dollar. What is interesting is that value stocks did not materially outperform growth stocks on the way up, and as the rally faded value stocks underperformed. UK equites underperformed other equity markets, not helped by the strong pound and a few notable stock issues. The strength of equities almost pulled up bond yields as the market priced in more growth, inflation, and hence more American interest rate rises. Sovereign bonds were weak as yields rose in both America and the UK - gilts fell 2.1% and Treasuries were down 1.4%. Investment grade bonds also fell but significantly outperformed their underlying sovereign markets, falling approximately 1%. High yield and emerging market bonds, both higher yielding and shorter duration, rose around 0.5%. It was a very strong reflation month.

Fund performance and activity

The fund performed broadly in line with the sector. Credit performed exceptionally well against a tough interest rate backdrop. High yield bonds and financial bonds performed very well, while loans were stable. Better quality (although generally lower spread and longer duration) industrial bonds were soft. We had cut our portfolio duration in December, which was fortunate. In addition, we successfully hedged some of the US investment grade holdings by shorting US Treasury interest rate futures. We bought holdings in Priceline, T-mobile and Crown bonds for their attractive yield.


Although we do not expect a structural break out in growth and inflation, we do acknowledge that the market may run with this narrative for a while. We expect inflation to rise a little in the first half of this year and then fade a little in the second half. We should not confuse short-term cyclical factors, which currently have the upper hand in markets, with some of the longer-term structural forces we have highlighted for many years now. We anticipate that a degree of patience and perspective will be needed from bond investors over the next couple of months. Glossary Risk assets: financial securities that can have significant price volatility (hence carry a greater degree of risk). Examples include equities, commodities, property and bonds. Duration: how far a fixed income security or portfolio is sensitive to a change in interest rates, measured in terms of the weighted average of all the security/portfolio’s remaining cash flows (both coupons and principal). It is expressed as a number of years. The larger the figure, the more sensitive it is to a movement in interest rates. ‘Going shorter duration’ refers to reducing the average duration of a portfolio. Alternatively, ‘going longer duration’ refers to extending a portfolio’s average duration. Reflation month: bond prices falling on inflationary expectations. Loans/secured loan: a loan which is secured on assets owned by the issuer, to reduce the risk for the lender. Spread/credit spread: the difference between the yield of corporate bonds over equivalent government bonds. Credit cushion: in this context, referring to a tightening or compression in ‘credit spreads’, resulting in higher prices for bonds. Hedge: taking an offsetting position in a related security, allowing risk to be managed. These positions are used to limit or offset the probability of overall loss in a portfolio. Various techniques may be used, including derivatives (derivatives are financial instrument for which the price is derived from one or more underlying assets, such as shares, bonds, commodities or currencies). Shorting US Treasury interest rate futures: selling a derivative contract on the hope the price will fall, which can subsequently can be bought back at a profit. If you are short an interest rate future you hope yields rise and hence prices will fall.

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.

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

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Important information

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

Janus Henderson Fixed Interest Monthly Income Fund

This document is intended solely for the use of professionals and is not for general public distribution.

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. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

If you invest through a third party provider you are advised to consult them directly as charges, performance and terms and conditions may differ materially.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment.

Any investment application will be made solely on the basis of the information contained in the Prospectus (including all relevant covering documents), which will contain investment restrictions. This document is intended as a summary only and potential investors must read the prospectus, and where relevant, the key investor information document before investing. Copies of the Fund’s prospectus and key investor information document are available in English, French, German, and Italian. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from Janus Henderson Investors registered office: 201 Bishopsgate, London EC2M 3AE.

Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Henderson Global Investors Limited (reg. no. 906355), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.

Copies of the Fund’s prospectus are available in English, French, Spanish German and Dutch. Key investor information documents are available in English, Danish, German, Finnish, French, Italian, Norwegian, Spanish, Swedish and Dutch. Articles of incorporation, annual and semi-annual reports are available in English. All of these documents can be obtained free of cost from the local offices of Janus Henderson Investors: 201 Bishopsgate, London, EC2M 3AE for UK, Swedish and Scandinavian investors; Via Dante 14, 20121 Milan, Italy, for Italian investors and Roemer Visscherstraat 43-45, 1054 EW Amsterdam, the Netherlands. for Dutch investors; and the Fund’s: Austrian Paying Agent Raiffeisen Bank International AG, Am Stadtpark 9, A-1030 Vienna; French Paying Agent BNP Paribas Securities Services, 3, rue d’Antin, F-75002 Paris; German Information Agent Marcard, Stein & Co, Ballindamm 36, 20095 Hamburg; Belgian Financial Service Provider CACEIS Belgium S.A., Avenue du Port 86 C b320, B-1000 Brussels; Spanish Representative Allfunds Bank S.A. Estafeta, 6 Complejo Plaza de la Fuente, La Moraleja, Alcobendas 28109 Madrid; Singapore Representative Henderson Global Investors (Singapore) Limited, 138 Market Street #34-03/04 CapitaGreen, Singapore 048946; or Swiss Representative BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich who are also the Swiss Paying Agent.

Specific risks

  • Investment management techniques that have worked well in normal market conditions could prove ineffective or detrimental at other times.
  • Some or all of the annual management charge is taken from capital. This may constrain potential for capital growth.
  • This fund is designed to be used only as one component in several in a diversified investment portfolio. Investors should consider carefully the proportion of their portfolio invested into this fund.
  • The Fund could lose money if a counterparty with which it trades becomes unwilling or unable to meet its obligations to the Fund.
  • The value of a bond or money market instrument may fall if the financial health of the issuer weakens, or the market believes it may weaken. This risk is greater the lower the credit quality of the bond.
  • Derivatives use exposes the Fund to risks different from, and potentially greater than, the risks associated with investing directly in securities and may therefore result in additional loss, which could be significantly greater than the cost of the derivative.
  • Changes in currency exchange rates may cause the value of your investment and any income from it to rise or fall.
  • If the Fund or a specific share class of the Fund seeks to reduce risks (such as exchange rate movements), the measures designed to do so may be ineffective, unavailable or detrimental.
  • When interest rates rise (or fall), the prices of different securities will be affected differently. In particular, bond values generally fall when interest rates rise. This risk is generally greater the longer the maturity of a bond investment.
  • Leverage arises from entering into contracts or derivatives whose terms have the effect of magnifying an outcome, meaning profits and losses from investment can be greater.
  • Any security could become hard to value or to sell at a desired time and price, increasing the risk of investment losses.

Risk rating




Important message

Fund name changes

Please note that from the 15 December 2017 funds previously named Janus or Henderson have been renamed Janus Henderson. This change aligns our product names with our name, Janus Henderson Investors, following the merger of Janus Capital and Henderson Global Investors in May 2017.

This name change does not impact on the management of the underlying funds and investors and advisers are not required to take any action. This does not affect Janus Henderson’s range of investment trusts.