September, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.86% (net) and -1.83% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.33% (net) in September, which returned -1.53% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 0.99% (net) over the year, and 0.18% (net) since inception per annum.
Despite higher levels of income, yields rose over the month resulting in negative capital returns for longer duration bonds. We remained disciplined with adding duration throughout the month and whilst valuations are becoming attractive, we are continuing to look for better entry levels to increase conviction and active portfolio overweights.
We favour overweight positioning in semi government bonds versus government yields, mostly via New South Wales, which contributed positively as semi yields outperformed by 8bps. Active overweights in swap versus bond yields has continued its positive contribution to excess returns as spreads continue to rally to below long term averages. We are electing to take this as an opportunity to take profit and further reduce our overweight exposures.
Australian credit performed positively in September, buoyed by the embedded elevated yields while spreads were broadly unchanged. We remain cautious and selective on credit, buying in the industries we like such as inflation protected industries, senior bank paper, and high quality well collateralised Asset Backed Security (ABS) structures.
The Fund underperformed versus the Benchmark during a weak month for bonds. Despite this, the Fund has significantly outperformed in the last 12 months. A cautious overweight duration position was a negative contributor as yields rose. During September we remained patient and left duration unchanged while we await more extreme yield overshoots as an opportunity to move further overweight.
The Fund is overweight to credit versus the Benchmark, benefitting from higher levels of income. It has maintained its level of credit protection (via credit default swaps), allowing for capacity to add again into any credit weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-33.pdfAugust, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 1.06% (net) and 1.10% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.32% (net) in August, which returned 0.74% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.03% (net) over the year, and 0.20% (net) since inception per annum.
Despite the intra-month volatility in bond markets, yields finished the month lower generating positive capital returns for longer duration bonds. This was coupled with higher levels of income. We continued to cautiously add duration at the margin throughout August as opportunities presented and rates lifted above our assessment of fair value. This overweight to duration was a positive contributor to performance in the month.
We hold an overweight position in semi government bonds, mostly via New South Wales, which benefitted from the fall in yields. In addition, one of the zero default risk positions we have pursued over the last year has been in the bond swap market. A recent narrowing in the spread has provided good levels of capital gain and contributed positively to performance.
Credit performed well in August, buoyed by the embedded elevated yields which offset some spread widening. We took profit on some of the credit in the portfolio, whilst maintaining high quality credit positions that we are comfortable with.
Overall, the Fund outperformed versus the Benchmark during a strong month for bonds. This adds to the significant outperformance for the Fund this calendar year vs the bond market. A cautious overweight duration position was a positive contributor and one that we have added to as the opportunity to add duration at levels above our fair value have presented during what was a volatile month.
More recently, the Fund has also been active in de-risking into the spread rally, adding some credit protection at cheapened levels, and taking profit on credit with plenty of capacity to add again into weakness.
We have identified a number of industries that currently have some challenges, however through our deep due diligence we have selected certain issuers within those sectors that we expect will be resilient. We are working with these companies to get them to issue at attractive levels for investors.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-32.pdfJuly, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.58% (net) and 0.61% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.06% (net) in June, which returned 0.52% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 0.60% (net) over the year, and 0.19% (net) since inception per annum.
The fall in bond yields in the month generated positive capital returns for longer duration bonds. This was coupled with higher levels of income. We cautiously added duration towards the end of June when rates lifted above our assessment of fair value. This overweight to duration was a positive contributor to performance in July as yields came off their highs in the aftermath of the CPI figures which indicated an easing in inflationary pressures.
We hold an overweight position in semi government bonds, mostly via New South Wales, as well as overweight swap yields over government bond yields. The fall in yields benefitted these positions while on a relative basis to government bonds the spread was broadly unchanged.
It was a good month of outperformance from credit, returns benefitting from both additional income and some spread tightening. Overweight credit allocations were a positive contributor as a result.
Overall, the Fund outperformed versus the Benchmark during a strong month for bonds. A cautious overweight duration position was a positive contribution as we built up positions to 0.7 year overweight vs the Benchmark to take into the month.
More recently, the Fund has also been active in de-risking into the spread rally, adding some credit protection at cheapened levels, and taking profit on credit with plenty of capacity to add again into weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-31.pdfJune, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.87% (net) and -1.84% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.08% (net) in June, which returned -1.95% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.19% (net) over the year, and 0.18% (net) since inception per annum.
The sharp rise in bond yields generated negative capital returns for longer duration bonds despite higher levels of income returns in 2023. We have remained cautiously positioned on duration and have recently sought to add overweight duration as yields presented some value toward the end of June.
Our overweight positioning in semi government bonds, mostly via New South Wales, as well as overweight swap yields over government bond yields both were positive contributors to return and alpha as spreads continued to tighten.
It was a good month of outperformance from credit, returns benefitting from both additional income and some spread tightening. Overweight credit allocations were a positive contributor as a result, and we continued to actively take profit on active positions added during FY23 that have moved from cheap back towards fairer valuations.
Overall, the Fund outperformed versus the Benchmark during a weaker month for bonds. A cautious overweight duration position was a modest negative contribution as we built up positions to 0.6 year overweight very late in the month as yields crested. The active choice of being overweight swap yields over government bond yields helped drive outperformance combined with additional return from spread sectors. The Fund has also been active in derisking into the spread rally, adding some credit protection at cheapened levels, and taking profit on credit with plenty of capacity to add again into weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-1-2.pdfMay, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.20% (net) and -1.15% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.01% (net) in May, which returned -1.21% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 0.56% (net) over the year, and 0.18% (net) since inception per annum.
Rising yields were a headwind for interest rate duration during the month, generating negative capital returns for longer duration bonds despite higher levels of income returns in 2023.
Throughout the month we continued to favour overweight positions in semi government bonds, mostly via New South Wales. This position was increased opportunistically during March volatility when spreads became more elevated. Spreads have rallied about 15bps since then and during May we reduced overweights prior to the Victorian government budget announcement, taking profit and contributing positively to performance. Swap linked positions also outperformed government bond yields and overweight positioning added alpha as spreads continued to tighten.
Overweight credit allocations were a positive contributor, benefiting during the month mainly from additional income and constructive spread movements.
The Fund's neutral Benchmark duration position resulted in a market beta drawdown in terms of performance which was in-line with the Benchmark return. The Fund has also been active in de-risking into the rally, taking profit on credit and semi government positions and adding some credit protection at cheapened levels.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-30.pdfApril, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.33% (net) and 0.37% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.14% (net) in April, which returned 0.19% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 0.28% (net) over the year, and 0.18% (net) since inception per annum.
Volatility remained persistent in April with bond yields trading in a near 35bp range, despite only ending the month slightly higher. Rates took a dip early in the month as the Reserve Bank of Australia (RBA) paused and markets remained cautious following the banking turmoil in March. However, this was soon reversed as yields rose mid-month reflecting the strong fundamentals resulting in a withdrawal of some rate cuts that had been priced in. The release of the Consumer Price Index (CPI) figures later in the month tempered enthusiasm somewhat, causing a bond market rally to finish off the month.
Spreads on semi-government bonds tracked tighter versus Treasuries, contributing positively to performance.
April was a good month for credit, with most of the attribution coming from higher coupon income as credit spreads stabilised. The Fund added additional alpha by taking advantage of opportunities that arose after the Silicon Valley Bank collapse and Credit Suisse merger. Some of the safest segments from a default risk perspective cheapened as the baby was thrown out with the bath water. These rebounded well in April as rationality prevailed. We took the opportunity to take some profit on those trades that had rallied/rolled down. We remain cautious on the corporate debt sector whilst harnessing the income from taking larger positions in the highest quality credit segments. We remain under invested in higher beta securities with powder dry for future acquisition.
April was a good month for relative performance of the Fund. Despite being cautious on credit, the strategy was overweight in the high quality segments which aided relative performance in the month. While looking for opportunities to add more duration, the Fund remained broadly in line with the benchmark as we await better pricing opportunities. In addition, we took the opportunity to add some credit protection.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-29.pdfMarch, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 2.86% (net), 2.90% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.30% (net) in March, which returned by 3.16% on the month.
Bond yields fell dramatically, which contributed strongly to the performance of long duration positioned portfolios.
Spreads on semi-government bonds tracked wider versus Treasuries, contributing negatively to performance on a relative basis.
Credit spreads weakened over the month, which was a detractor to performance. Generous coupon income helped to preserve capital in what was a challenging month for physical credit. Floating rate credit outperformed fixed rate as investors shifted out of fixed rate bonds and into floating rate notes following the rally in bond yields. Fixed rate bank and corporate credit, including Tier 2 debt, underperformed government bond equivalents.
March was a strong month for performance, given the significant fall in bond yields. However, the Fund underperformed on a relative basis, opting for a neutral to slightly short duration versus the Benchmark. The Fund’s overweight to credit was also a detractor versus the Benchmark given the weakness in credit spreads.
The Fund has a strong yield advantage versus the Benchmark, which could contribute to relative outperformance in 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-28.pdfFebruary, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -0.98% (net) and -0.94% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.34% (net) in February, which returned -1.32% on the month.
Bond yields rose over the month, unwinding half of the strong positive return gained in the month prior. The price fall on the short end of the yield curve outpaced longer-term bond moves as the curve re-adjusted to the Reserve Bank of Australia’s (RBA) hawkish stance, indicating more rate rises to come.
We have remained cautious on adding duration, as our outlook for further central bank tightening is broadly aligned with market pricing. Meanwhile, overweight duration to swap rates over government bond yields has been a positive contributor. Spreads on semi-government bonds tracked tighter versus treasuries, contributing positively to performance on a relative basis.
Globally, credit spreads weakened over the month, with Australia outperforming with local spreads 5 basis points (bps) tighter despite strong supply. Generous coupon income also helped buoy performance in the month. Floating rate credit outperformed fixed rate notes given the rise in bond yields. Active allocations to Tier 2 debt were a strong driver of returns as these assets significantly outperformed. We have favoured generating excess returns by having larger positions in high quality assets with greater liquidity, complemented with sub-sectors like Tier 2, where attractive value has been on offer.
February was a strong month for relative performance, with value added through active management in both rates and credit. The Fund preserved capital on a relative basis, opting for a neutral to slightly short duration versus the Benchmark. Selective rotation in subsectors of credit enhanced returns, especially the Fund's weighting towards high quality investment grade credit in resilient, outperforming industries.
Looking forward, with much of the heavy lifting in rates behind us, and the market well-priced for more rate rises, the outlook for the asset class is revitalised. The higher yields with defensive characteristics repaired may very well come in handy as growth slows later in the year from restrictive policy. Further, the Fund has a strong yield advantage versus the Benchmark, which could contribute to relative outperformance in 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-27.pdfJanuary, 2023
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 3.18% (net) and 3.22% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.42% (net) in January, which returned 2.76% on the month.
The fall in bond yields was one of the main drivers of return in the month. The rally on the long end of the curve outpaced that of the short end, so active management in curve positioning also played a part.
While broadly remaining cautious on adding duration, the Fund did take advantage of higher yields on offer at the end of December. The Fund then took profit on these positions early in January, taking active duration broadly back to neutral. The Fund’s exposure to swaps was a positive contributor in January, outperforming on a relative basis.
Spreads on semi-government bonds were broadly unchanged versus treasuries, while swap spreads outperformed government bonds, contributing positively.
Credit spreads tightened over the month. This, together with generous coupon income, helped buoy performance in the month. Fixed rate credit outperformed floating rate notes given the fall in yields on the risk-free rate. We have favoured having larger positions in high quality assets rather than taking smaller positions in more volatile high beta sectors.
January was a strong month for relative performance, with value added through active management in both rates and credit. The rally on the long end of the curve outpaced that of the short end, so active management in curve positioning also played a part. While broadly remaining cautious on adding duration, the Fund did take advantage of higher yields on offer at the end of December. The Fund then took profit on these positions early in January, taking active duration broadly back to neutral. Selective rotation in subsectors of credit enhanced returns, especially the portfolio's weighting towards high quality investment grade credit in resilient, outperforming industries. 2022 was a tough environment for investors with a rare negative performance calendar year for defensive assets and growth assets.
Looking forward, with much of the heavy lifting in rates behind us, the outlook for the asset class is revitalised and the higher yields with defensive characteristics repaired may very well come in handy as growth slows later in the year from restrictive policy. Investors should expect the opposite of what has been the case over the past couple of years from central banks. Further, the Fund has a strong yield advantage versus the Benchmark, which could contribute to relative outperformance in 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-26.pdfDecember, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.89% (net) -1.85% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.17% (net) in December, which returned -2.06% on the month.
The rise in yields was a detractor for long dated fixed rate bonds over the month. However, active portfolio management including having neutral duration positions throughout most of the month aided performance on a relative basis. It was only when yields lifted significantly towards month end that portfolios added a limited amount of duration.
When given the choice between buying duration through government bonds or positioning via the swap market, we have found the swap market to offer up more attractive pricing compared to bond yields. The Fund’s exposure to swaps were a positive contributor in December outperforming on a relative basis.
Spreads leaked slightly wider in semi-government bonds detracting from performance, while swap spreads outperformed government bonds contributing positively.
A decent rally in credit spreads together with generous coupon income led to outperformance in investment grade credit. Fixed rate underperformed floating rate notes given the rise in yields on the risk free rate.
December was a strong month for relative performance, with value added through active management in both rates and credit. A neutral weight to duration vs the benchmark prevented relative underperformance. Selective rotation in subsectors of credit enhanced returns, especially the portfolio's weight towards high quality investment grade credits in resilient outperforming industries. 2022 was a tough environment for investors with a rare negative performance calendar year for defensive assets and growth assets as the Australian Fixed Interest market, measured by Bloomberg comp was down almost 10%, driven primarily by a lift in yields, with magnitude not seen in four decades and a risk of environment, impacting credit assets.
Looking forward, with much of the heavy lifting in rates behind us, the outlook for the asset class is revitalised and the higher yields with defensive characteristics repaired may very well come in handy as growth slows later in the year from restrictive policy. Investors should expect the opposite of what has been the case over the past couple of years from central banks. Further, the Fund as a strong yield advantage vs the benchmark which should bode well for outperformance in 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-25.pdfNovember, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 1.96% (net) 2.00% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.41% (net) in November, which gained by 1.55% on the month.
Duration and yield curve positioning played a positive role in November. When given the choice between buying duration through government bonds or positioning via the swap market, we have found the swap market to offer up more attractive pricing compared to bond yields. The Fund’s exposure to swaps were a positive contributor in the month, outperforming on a relative basis.
Spread tightening in semi-government bonds aided performance in the month, outperforming government bonds on a relative basis.
A decent rally in credit spreads together with generous coupon income led to outperformance in investment grade credit. Fixed rate major bank senior outperformed floating rate notes. This proved to be a strong contributor given the Fund’s recent active selection bias towards fixed rate securities which have been outperforming due to ongoing investor demand.
November was a strong month for performance, with value added through active management in both rates and credit. A slight overweight to duration vs the Benchmark was rewarded. The Fund was positioned well to benefit from the retraction in bond yields. Selective rotation in subsectors of credit enhanced returns, especially the Fund’s weight towards high quality investment grade credits in resilient outperforming industries
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-24.pdfOctober, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.58% (net) 0.62% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.35% (net) in October, which gained by 0.93% on the month.
While October was a volatile month for equity, credit and high yield, interestingly bonds did play their role as a diversifier to risk assets, restoring its traditional role as ‘portfolio insurance’. Bond yields finished the month lower and made a positive contribution to performance.
The underperformance against the Benchmark over the month came from the widening in credit spreads in high quality sectors including major bank senior, semi-government and bond swap spreads. The Fund did take profit on some of our overweight position to major bank senior debt early in October, which cushioned some of the impact as spreads widened later in the month, albeit the Fund was still not immune.
Whilst the Fund now employs a healthy 'Yield-To-Maturity' and income is coming through, the volatility in bond markets is still impacting performance. We have seen these events through other market cycles and patience is required to navigate this environment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-23.pdfSeptember, 2022
The Janus Henderson Australian Fixed Interest Fund - (Fund) returned -1.66% (net) -1.62% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.30% (net) in September, which fell by -1.36% on the month. However, the Fund has returned 5.89% (net) since inception per annum.
During September the primary driver of any underperformance was bond yields rising. It was a challenging environment for fund managers, with no cushioning to be had from credit sectors such as high yield, loans and EM debt. We are focused on capital preservation at this time, with portfolios defensively positioned as credit and higher rates all impact returns.
Healthy yield levels and increases in cash rates are beginning to generate stronger total returns from yield income each month. Favoured allocations to high quality credit sectors, mostly AAA and AA type assets have cushioned the impact relative to other sectors which have underperformed to a larger magnitude. This is a deliberate position to navigate through the rising rate environment.
It should be noted that policy tightening only began five-months ago, so we need to be patient and be positioned well for what comes next. With the yield on the Fund approaching 5%, future returns are expected to be solid.
Whilst the Fund now employs a healthy 'Yield-To-Maturity' and income is coming through, the volatility in bond markets is still impacting performance. We have seen these events through other market cycles and patience is required to navigate this environment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-22.pdfAugust, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -2.63% (net) -2.60% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.09% (net) in August, which fell by -2.54% on the month..
During August the primary driver of any underperformance was bond yields rising, as well as some impact from semi governments, bond swap, and non financial credit. Following the big rally in bond markets from mid-June to mid-August, we cut duration across all of our strategies materially, in most cases by 50%. As yields started rising again in the latter part of August, we recommenced adding back in some duration. The environment we are in is not conducive to a ‘set and forget’ strategy on duration, in our view it needs to be actively navigated. The past four months are a good example of the importance of active management.
Healthy yield levels and increases in cash rates are beginning to generate stronger total returns from yield income each month. Favoured allocations to high quality credit sectors like bank senior and covered bonds performed well over the month and was a positive contributor to returns. Major bank Tier 2 allocations materially outperformed other corporate credit during the month contributing positively.
Whilst the Fund now employs a healthy 'Yield-To-Maturity' and income is coming through, the volatility in bond markets is still impacting performance. We have seen these events through other market cycles and patience is required to navigate this environment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-21.pdfJuly, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 4.00% (net) 4.04% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.64% (net) in July, which gained by 3.36% on the month. The Fund has returned -10.62% (net) over the year, and 6.09% (net) since inception per annum.
The team’s ‘fair value’ interest rate process and qualitative judgement led us to position portfolios with the most overweight duration position in the history of portfolios by mid-June despite being a little early in adding duration and the recent reassessment by markets vindicates such a high conviction strategy now delivering results for our investors. Our targeted yield curve strategy focusing on the two to four-year part of the yield curve to effectively ‘lock in’ what we assessed as elevated yields unlikely to be fully delivered by the RBA benefited from this part of the yield curve rallying the most.
In terms of top down sector strategy, having previously preserved capital with significant credit protection via CDS earlier in the year our focus has been on accumulating more liquid high quality credit assets (predominantly AAA, AA). This exposure to credit was a positive contributor to performance in the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-20.pdfJune, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -2.00% (net) -1.98%(gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index(Benchmark) by -0.52% (net) in June, which fell by -1.48% on the month. However, the Fundhas returned 5.96% (net) since inception per annum.
Bond markets sold off in mid-June with the magnitude of yield movements resemblingsomething that’s normally witnessed over a one-year time frame, not one week! From whenbond yields were at their lows to the peak mid-month, the drawdown of the Australian bondmarket, as measured by the Bloomberg AusBond Composite 0+ Yr Index (equally weighted)represented -15%. This was the largest fall observed in more than 40 years – a three standarddeviation event. This complexity comes not only from a normalisation of cash rates but also anunwinding of unprecedented, unconventional policy that has artificially pushed bond yields to100-year lows during the pandemic period.
Globally coordinated central banks, and a follow through of early action with higher rates shouldhave sufficient impact to cool pockets of consumption and soften labour price bargaining. Thisneed for central banks to keep raising rates will reduce thereafter. While markets are movingback towards our assessment of fair value, we still believe that the bond market has overpricedthe actual tightening cycle that the Reserve Bank of Australia (RBA) will undertake. Whilemarket pricing has resulted in negative performance, it has given us the opportunity to ‘lock in’very good yields for the Fund at elevated levels in the context of the last few years. We areprepared to ride this volatility as we 'lock in' these higher rates, noting there is plenty to go onthe pathway for interest rates.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-19.pdfApril, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -2.01% (net) and -1.97%(gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index(Benchmark) by -0.52% (net) in April, which fell by -1.49% on the month. However, the Fundcontinues to beat the Benchmark by 0.18% (net) since inception per annum.
Rates strategies are actively managed in the Fund and performance was impacted by further upward movements in bond yields. Over the month, the Fund added more duration. Markets have, in our assessment, overshot fair value and we’ve therefore leaned against current pricing, meaning near-term underperformance. Seeing the opportunity to lock in what we assess as attractive ‘all-in yields’ caused by dislocated markets reflecting a cash rate profile that is unlikely to be delivered by the Reserve Bank of Australia (RBA) over the next couple of years, we started adding meaningful duration to the Fund. Implementing this strategy while bond yields continued to rise detracted from performance over the month. However, bond investing is rarelyabout the direction of cash rates, but rather about what’s already priced in relative to how fundamental may eventuate. As opportunities became clearer, we continued to add duration, looking to lock in the current yields for investors.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-17.pdfMarch, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -4.43% (net) and -4.39% (gross) in March. The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.68% (net), which fell by -3.75%, one of the largest monthly falls in nearly four decades. However, the Fund continues its outperformance by 0.20% (net) per annum since inception.
Rates strategies are actively managed in the Fund and performance was impacted by the large movement upwards in bond yields. Markets have, in our assessment, overshot fair value and we’ve therefore leaned against current pricing, meaning near-term underperformance. Seeing the opportunity to lock in what we assess as attractive ‘all-in yields’ caused by dislocated markets reflecting a cash rate profile that is unlikely to be delivered by the RBA over the next couple of years, we started adding meaningful duration to the Fund. Implementing this strategy while bond yields continued to rise detracted from performance over the month. However, bond investing is rarely about the direction of cash rates, but rather about what’s already priced in relative to how fundamentals may eventuate. As opportunities became clearer, we continued to add duration, looking to lock in the current yields for investors
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-16.pdfFebruary, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.38% (net) and -1.36% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by -0.17% (net) in February, which fell by -1.21% on the month. However, the Fund outperforms the Benchmark across most periods, including by 0.36% (net) over the year, and 0.23% (net) since inception per annum.
The past six months have been a challenging environment for fixed interest investors with a number of episodes of rising bond yields and credit spreads either tracking sideways or drifting up. In truly ‘risk-off’ market events, portfolios are likely to have some negative impact from mark-to-market valuations. In this case, weaker credit markets weighed on corporate bond pricing, while rates have been volatile – tussling with the negative impact of sanctions on global growth versus the inflationary pressures from supply-side shock. However, the latter concerns led to rates higher which negatively weighed on performance.
Performance was impacted by the large movement upwards in shorter to medium-term bond yields. As inflation pressures built earlier in the month, rates initially sold off as future rate hikes by the Reserve Bank of Australia (RBA) were brought forward and priced in aggressively for this year. We added to our duration position during this weakness, enabling us to have peak levels of duration at the peak in bond yields. This ensured that we went into this latest round of Russian invasion and turmoil well positioned with a longer duration stance. Despite the pullback in rates towards the end of the month, yields were still higher in February.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-15.pdfJanuary, 2022
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.33% (net) and -1.29%(gross) in January. The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index(Benchmark) by -0.31% (net) in January, which fell by 1.02%. However, the Fund continues its out performance, beating the Benchmark across longer time periods, including by 0.06% (net)over the year, and 0.29% (net) p.a. since inception. A change in narrative by the US Federal Reserve (Fed), a higher-than-expected domestic inflation read, and subsequent likelihood of rate hikes by the Reserve Bank of Australia (RBA)this year resulted in poor bond market performance in January.
Rates strategies are actively managed in the Fund and performance was impacted by the large movement upwards in shorter to medium term bond yields. The Fund held a modest long position in the three-year part of the curve, which underperformed given the front end of the curve bore much of the brunt of the sell-off, as future rate hikes by the RBA were brought forward and priced in aggressively for this year. Whilst the peak in yields in this episode is hard to predict, we commenced adding to duration in the month where we felt market pricing had deviated from our assessment of ‘fair value’ and offered a reasonable level of cushion should yields continue to climb in the near term. This detracted value in January, but should bear fruit over the coming period. Should yields climb further, all things being equal, we look to add further to this position.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-13.pdfDecember, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.22% (net) 0.26% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.13% (net) in December, which gained by 0.09% on the month. The Fund continues its outperformance, beating the Benchmark across all periods including by 0.27% (net) over the year, and 0.25% (net) since inception per annum. December was the final episode of a tumultuous bond market environment, with bond yield movements mixed and volatile, while spread sectors slightly outperformed after November Omicron jitters.Rates strategies in the Fund are actively managed. The Fund had a modest level of value add from rate strategies, yield curve positioning, duration and inflation-linked bonds.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-12.pdfNovember, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 2.55% (net) and 2.59% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.47% (net) in November, which gained by 2.08% on the month. The Fund continues its outperformance, beating the Benchmark across most periods, including 0.34% (net) outperformance over the year, and 0.25% (net) since inception per annum.
November offered a fertile environment for active management given the rates market volatility. Opposing themes throughout the month kept rates in a tug-of-war. At times, there was upward pressure on yields as the markets digested global inflationary pressures, positive economic activity as lockdowns were lifted, central banks such as NZ raising rates while noting the Bank of England’s intention to do so, and the tapering of asset purchases (and the potential acceleration of this by the US Federal Reserve (Fed) as indicated by Jerome Powell at monthend). Despite these pressures, yields were lower in the month as dovish comments by the Reserve Bank of Australia, COVID-19 lockdowns in parts of Europe and the uncertainty surrounding the new Omicron strain ensured a dominating risk-off tone.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-11.pdfSeptember, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -1.34% (net) and -1.31% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by a solid 0.17% (net) in September, which fell -1.51% on the month. The Fund continues its outperformance, beating the Benchmark across all periods including by 1.00% (net) over the year, and 0.24% (net) since inception per annum. This outperformance demonstrates the very fruitful environment for active managers, in which superior relative returns can be delivered through active management of benchmark aware strategies.
Bond yields finished the month significantly higher. Bond markets were initially on alert to an imminent Evergrande default, but later in the month these concerns eased, and the market started to focus on the inflationary pressures building in the system as well as a clearer path by some central banks. This resulted in upward pressure on rates and a negative drawdown for bond markets. Given this Fund is a benchmark aware strategy, returns were still negatively impacted by the sell-off in bonds. However, pleasingly, the Fund was geared towards benefiting from a higher yield environment and the reopening of the two largest states and Australia more broadly. Given markets are forward thinking, and a pathway out of lockdown is imminent, several active strategies employed over recent months to limit drawdowns came to fruition in September.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-1-1.pdfAugust, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.00% (net) and 0.05% (gross). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.09% (net) in August, which rose 0.09% on the month. Notwithstanding, the Fund continues its outperformance, beating the Benchmark net of fees by 0.89% over the year, and 0.23% since inception per annum. This outperformance also demonstrates the very fruitful environment for active managers, in which a decent positive return can be delivered through active management of benchmark aware strategies. In this case, nearly doubling the annual return of the bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index). The Fund’s rates strategies are actively managed. Bond yields were a touch lower during the month, despite a lot happening from a health and economic perspective and returns from our rates positioning was relatively benign. The Fund has been moving to a slightly underweight duration position from overweight, as we look to the committed reopening up of our economy led by NSW. Our base case is that, while the RBA will stay on the side-lines during this lockdown phase and will maintain that safety net of support if required, the yield curve will steepen over time as vaccination rates increase.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-10.pdfJuly, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 1.90% (net) and 1.94% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.14% (net) in July, which rose 1.76% on the month, with the Benchmark now recouping all of the losses from the large drawdown in February. The Fund continues its outperformance, beating the Benchmark net of fees by 1.14% over the year, and 0.25% since inception per annum. This outperformance also demonstrates the very fruitful environment for active managers, in which a decent positive return can be delivered through active management of benchmark aware strategies. In this case, more than doubling the annual return of the bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index).
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-9.pdfJune, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.86% (net) and 0.90% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.17% (net) in June, which rose 0.69% on the month, further recouping some of the losses from the large drawdown in February. The Fund continues its outperformance, beating the Benchmark net of fees by 1.42% over the year, and 0.23% since inception per annum. This performance also demonstrates the very fruitful environment for active managers in this CYTD and the successful year for investor outcomes when positive returns can still be delivered through active management of benchmark aware strategies even as the bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) return was negative.
The Fund seeks to preserve capital during falling markets and enhance returns at other times. This is primarily achieved through active asset allocation across rates strategies (including long duration fixed interest and floating rate) and sector strategies (risk free and various spread products).
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-8.pdfMay, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.33% (net) and 0.37% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.06% (net) in May, which rose 0.27% on the month, further recouping some of the losses from the large drawdown in February. The Fund continues its outperformance, beating the Benchmark net of fees by 1.80% over the year, and 0.23% since inception annualised. Over the 2020 calendar year, the Fund also delivered very strong performance for investors against its objectives and the Benchmark.
The Fund seeks to preserve capital during falling markets and enhance returns at other times. This is primarily achieved through active asset allocation across rates strategies (including long duration fixed interest and floating rate) and sector strategies (risk free and various spread products).
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-7.pdfMarch, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.82% (net) and 0.86% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.02% (net) in March, which rose 0.80% on the month. The Fund continues its outperformance, beating the Benchmark net of fees by 2.64% over the year, and 0.22% since inception. Over the 2020 calendar year, the Fund also delivered very strong performance for investors against its objectives and Benchmark. While the Fund is managed with an absolute return mindset, active interest rate management plays a significant role in its performance.
Over the month, the Fund gained performance by holding its largest overweight duration position at the turning point, after yields pushed to 2-year high at the end of February. This aided performance through March as bond markets settled. Once bond yields lowered, we trimmed our long position, taking profit. This also reduced the impact on the Fund as yields once again lifted towards the end of the month. Active rates management proved successful, coupled with a positive contribution from our modest allocation to hybrids and offshore higher yielding sectors. Our overweight position to inflation-linked notes was also a strong contributor to performance in the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-5.pdfFebruary, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) in February by 45 basis points (net), returning -4.0% (gross) and -4.03% (net). Whilst this month’s underperformance is not ideal, February’s result needs to be assessed in the context of the largest monthly drawdown in the bond market since 1983. This month comes on the back of a string of rising bond yields, with the Benchmark having had four months of negative returns with November (-0.11%), December (-0.27%), January (-0.42%) and February (-3.58%) with a cumulative -4.35%. The Fund has outperformed the Benchmark over this four month period.
On the rates side over February, the Fund was adversely impacted in absolute terms by sharply rising bond yields and a dramatic steepening in the yield curve. Our ‘fair value’ process indicated that markets (longer-term bond yields) had begun overshooting and as such we had commenced adding interest rate risk (duration) relative to the Benchmark. It is always difficult to pick turning points as bond markets overshoot, but our process favours getting set early in order to have the largest active position when markets turn as trying to reposition after this has occurred is rarely successful. Despite some tactical duration management intra-month cushioning the impact, the sheer magnitude of lift in bond yields adversely impacted returns. Offsetting to some extent was the Fund’s exposure to inflation linked bonds (inflation protection) as inflation expectations lifted.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-3.pdfJanuary, 2021
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -0.51% (net) and -0.46% (gross). The Fund slightly underperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.09% (net) in January, which fell -0.42% on the month. However, it continues its outperformance across all other periods beating the Benchmark net of fees by 0.60% over the quarter, 2.28% over the year, and 0.25% annualised since inception. Over the 2020 calendar year, the Fund also delivered very strong performance for investors against its objectives and Benchmark.
The Fund seeks to preserve capital during falling markets and enhance returns at other times. This is primarily achieved through active asset allocation across rates strategies (including long duration fixed interest and floating rate) and sector strategies (risk free and various spread products). Sector allocation contributed positively to overall outperformance in January versus the Benchmark, while a modest overweight duration position detracted from returns as bond yields rose in the month. The steepening of the yield curve in January lent to active intra-month management in interest rate (duration) management. We took advantage of the steep curves whilst reducing the Fund’s sensitivity to rising bond yields.
Semi-government bond performance was down over the month, but outperformed treasuries. The rise in bond yields at the long end, offset the coupon income. Issuance was generally quiet over the month, until the RBA re-started its bond purchasing program and semi-government bonds began issuing again in the latter part of the month. This has resulted in the semigovernment spreads tightening, following a period of stability in the aftermath of the budget
announcements and ratings downgrade sell off towards the end of 2020. Perhaps one of the biggest contributors to relative performance of late has been the Fund’s exposure to inflation-linked bonds, where breakeven rates (inflation expectations) rose again during January. While the rollout of the vaccine in the US and Europe, together with a higher domestic CPI print lifted inflation expectations. The Fund has a good level of exposure to inflation protection via these securities.
Credit in its various forms had another good month in January. The spread tightening on corporate investment grade credit was a decent contributor for performance over the month. The recent addition of cyclical names benefitted the Fund as the vaccine draws near in Australia. The Fund continues to maintain a high allocation to recession-proof, sleep-well-atnight industries to balance out the cyclical issuers (major airports, toll roads, large diversified lowly geared property trusts) which will likely perform well in a post-vaccine world.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-2.pdfDecember, 2020
The Janus Henderson Australian Fixed Interest Fund (Fund) returned -0.08% (net) and -0.04% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.19% (net) in December, which fell -0.27% on the month. Further, it continued its string of outperformance across all periods beating the Benchmark net of fees by 0.88% over the quarter, 2.49% over the year, and 0.25% since inception.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport-1.pdfNovember, 2020
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.40% (net) and 0.44% (gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.51% (net) in November, which fell 0.11% on the month. Further, it continued its string of outperformance against the Benchmark across all periods beating the Benchmark net of fees by 0.74% over the quarter, 2.27% over the year, and 0.24% since inception.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonAustralianFixedInterestFund_MonthlyReport.pdfOctober, 2020
The Janus Henderson Australian Fixed Interest Fund (Fund) returned 0.47% (net) and 0.50%(gross). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index (Benchmark) by 0.19% (net) in October, which was +0.28% on the month. Further, it continued its string of outperformance against the Benchmark across all periods beating the Benchmark by 0.39%over the quarter, 1.76% over the year, and 0.22% since inception.
Rates contributed positively driven by the fall in bond yields in the front end of the curve, as the outlook for a rate cut by the Reserve Bank of Australia (RBA) was priced into markets. Despite the month ending with a lift in yields on longer-dated maturities, the coupon income in the period together with capital gains on the short end resulted in an overall positive return from bonds in the Fund.
ticker: IOF0046AU
commentary_block: Array
factsheet_url:
Janus Henderson Australian Fixed Interest Fund – Monthly Report
release_schedule: Monthly
fund_features:
Janus Henderson Australian Fixed Interest Fund seeks to achieve a total return after fees that exceeds the total return of the Benchmark (Bloomberg AusBond Composite 0+ Yr Index), over rolling three-year periods.
- A range of strategies applied.
- Under normal circumstances, the Underlying Fund will invest in a portfolio of cash and fixed interest securities including government, semi-government and supranational bonds, corporate debt and asset backed securities.
- Derivatives may be used solely for investment and risk management purposes and cannot be used to gear the Underlying Fund.
- The Fund is considered as medium risk.
manager_contact_details: Array
asset_class: Fixed Income
asset_category: Bonds - Australia
peer_benchmark: Fixed Income - Bonds - Australia Index
broad_market_index: Australian Bond Composite 0-10Y Index
structure: Managed Fund