September, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.19% (net) and 0.25% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by -0.15% (net) in September, which returned 0.34% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 3.76% (net) over the year, and 2.34% (net) per annum over the past 5 years.
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.
Floating rate credit subsectors outperformed for the month with domestic listed hybrids and global loans the top subsectors, while emerging market debt and high yield underperformed due to higher US treasury yields and spreads beginning to widen. Australian Tier 2 continued to outperform delivering returns above bank bills mainly though income advantage, while the hybrid market rebounded from a negative previous month as well as some support driven by APRA announcing a consultation into the local use of additional Tier 1 capital instruments. Now that Tier 2 valuations have moved from attractive to fair, we have actively increased capacity for future issuance that may come with better concessions in tougher market conditions. Relative value opportunities continue to present with some of the domestic primary corporate transactions proving very popular and outperforming the broader market, with spreads rallying 10-15bps despite weaker broader spread conditions.
Across the quarter it was a strong period for excess returns, particularly from factors such as bond swap spread compression (12bps tighter), and credit spreads contributing positively from income advantage and some further spread compression which slowed in September. Financial credit spreads were broadly unchanged as the market was met with strong supply, while corporate spreads outperformed with BBBs compressing 11bps over the quarter as investors favoured adding defensive sectors like utilities and transport infrastructure at high outright yields. This was evidenced where primary market transactions were well bid in general and new deals the Fund participated in have rallied in spread, in particular Chorus, Westconnex, and Suncorp Tier 2 were hotly contested and oversubscribed, showing the environment is still one that favours active security selection.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-31.pdfAugust, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.80% (net) and 0.84% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by 0.43% (net) in August, which returned 0.37% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 3.15% (net) over the year, and 2.39% (net) per annum over the past 5 years.
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.
Global loans were the top performing credit subsector for the month, while emerging market debt and high yield underperformed due to higher US treasury yields. In Australian Tier 2 continued to outperform delivering returns above bank bills, while listed hybrids had a negative month due to new supply from NAB. We remain uninvested in domestic hybrids, with our favoured overweight Australian Tier 2 allocation having performed well and adding value. Now that Tier 2 valuations have moved from attractive to fair, we have started to take profit to increase active capacity for future issuance that may come with better concessions. Relative value opportunities are still apparent in this environment and we switched some allocations out at 5.9% yield into the new Lloyds Subordinated notes at 7.09%, which yields more than listed hybrids.
Another strong month of returns for investors were driven from healthy yields available on quality credit as well as active credit selections that performed well. Income generation remains strong and local Australian high grade credit continues to add value this year with credit spreads rallying further. Real estate investment trusts (REITs) in particular had a good month as reporting season painted a positive picture in Retail which assisted broader REIT spreads tighter, which have looked cheap on relative value. This was complimented by our overweight interest rate duration position of 1.3 years, which was a positive contributor into the fall in bond yields generating positive capital returns.
It remains a fruitful environment for active security selection. We used the market risk appetite and ongoing rally in major bank Tier 2 spreads to continue some profit taking, reducing exposure as we expect primary supply to pick up now that local reporting season is behind us. We will seek to redeploy liquidity into new primary deals which are coming out at attractive yield levels, which we took advantage of in the Lloyds deal entering at a 7.1% yield.
Fund yield remains around 6.0% with overall cautious risk positions with low levels of sub investment grade exposure and no listed hybrid allocations, with material credit default swap protection positions in place. Despite an ongoing recovery in sub investment grade spreads, we remain patient awaiting better valuation entry points in higher beta or more illiquid segments of the credit market. In the meantime, investors are still rewarded with healthy returns from higher quality parts of the market which offer better risk adjusted prospects.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-30.pdfJuly, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.88% (net) and 0.93% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by 0.51% (net) in July, which returned 0.37% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 3.11% (net) over the year, and 2.35% (net) per annum over the past 5 years.
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.
With markets adjusting expectations for a gentler path for policy tightening and slowing growth, this aided higher beta credit sectors across loans, emerging market debt, high yield and hybrids, with all performing well. We remain very modestly allocated across these sectors as market sentiment remains fickle and the impacts of policy tightening are slowly feeding through, with asymmetric downside in our view. Australian Tier 2 continued to exhibit strong outperformance from spreads and income and has been our preferred substitute for lower quality sectors.
Healthy returns were driven from attractive yields on quality credit as well as active credit selections that continued to perform well during July. This was complimented by some active repositioning in interest rate duration as bond yields rose sharply through June into early July, and we moved to add some duration back into the portfolio to lock in some elevated yield levels into the portfolio. Interest rate duration was lifted to 1.2 years, an increase of 0.9 since the start of June, as yields approached more attractive levels to lock in for investors.
It remains a fruitful environment for active security selection. We used the stronger market risk appetite and sharp rally in Tier 2 spreads to continue some profit taking. We reduced exposure to unlisted hybrids, as well as longer tenor Tier 2 securities. We also added some credit default swap (CDS) protection as entry levels are as cheap as they have been for some time. We will seek to redeploy liquidity into new primary deals as reporting season unfolds in August. We saw some opportunity to allocate to AAA rated credit during the month via primary activity from Suncorp in covered bonds, as well as some well seasoned AAA rated prime residential mortgage-backed securities (RMBS) at a spread of 1.17% above bank bills, which looks attractive on a risk adjusted basis.
Fund yield remains around 6.0% with cautious risk positions. Should bond yields climb further in sympathy to global market pricing, we see value in locking in higher yield levels for income investors via adding duration, which can also serve as a defensive buffer if risk markets wobble.
The Fund’s selective allocations towards high quality investment grade credit have continued to perform well, and despite a strong recovery in sub investment grade returns, we remain patient awaiting better valuation entry points in higher beta or more illiquid segments of the credit market.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-29.pdfJune, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.57% (net) and 0.61% (gross).
The Fund outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by 0.27% (net) in June, which returned 0.3% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 3.6% (net) over the year, and 2.31% (net) per annum over the past 5 years.
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.
In a stronger month for credit loans, emerging market debt, high yield and hybrids all performed well. We remain very modestly allocated across these sectors as conditions remain choppy, with asymmetric downside in our view. Australian Tier 2 also exhibited outperformance from spreads and income and has been our preferred substitute for lower quality sectors.
Portfolio return was primarily driven by income with additional positive contributions from the tightening in local Tier 2 and corporate bond spreads. The Fund was cautiously positioned on interest rate duration across the quarter as sharply rising bond yields saw shorter duration and floating rate securities outperform. We used the market conditions late in the June quarter to build liquidity and begin to add duration back into the portfolio.
We remained highly active on security selection in the AUD investment grade space. We allocated into new primary deals which came with reasonable new issue concessions which included Westpac Tier 2 and QBE subordinated notes with coupon rates between 6.4 - 7.4%, while in lower beta credit also saw value in Bendigo AAA Covered bonds with an initial coupon of 5.4%. In the strong credit environment there were opportunities to maintain our liquidity, so we were also active in taking profit on other bank Tier 2 notes which were trading at tighter spreads than the new issuance, allowing us to pick up yield without adding risk to the portfolio. We also saw some attractive entry levels in credit protection and added some additional CDS protection. Portfolio spread duration was shortened by 0.2 years as a result.
The push higher in yields has seen Fund yield rise to 6.0% even as we have been reducing credit risk positions. As bond yields climb sharply, we start to see value in locking in higher yield levels for income investors via adding duration, which also serves as a defensive buffer if risk markets wobble. The Fund’s selective allocations towards high quality investment grade credit have continued to outperform whilst we remain patient awaiting better valuation entry points in higher beta or more illiquid segments of the credit market.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-1-6.pdfMay, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.47% (net) and 0.51% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by 0.18% (net) in May, which returned 0.3% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.99% (net) over the year, and 2.68% (net) over a three year rolling period.
Overweight credit allocations were a positive contributor, benefiting during the month mainly from additional income and constructive spread movements.
Higher yielding credit sectors largely were able to benefit from additional income in the more stable credit conditions. European Loans were the top performing sub sector, followed by Australian Tier 2 with floating rate credit classes outperforming in the rising bond yield environment. ASX listed hybrids underperformed due to new supply from CBA who issued new hybrids pushing market spreads higher. We remain patient and cautiously positioned with reduced allocations to sub investment grade, illiquid and heavily structured credit sectors moving into the latter stages of the credit cycle with pockets of repricing continuing through the year.
The Fund delivered solid performance in a tougher market environment. A cautious interest rate duration position immunised the Fund from rising bond yields and floating rate assets benefitted from further increases in RBA cash rates. Allocation across the credit sectors was key with Australian floating rate notes (FRNs) and Tier 2 securities and Loans outperforming bonds, cash and hybrids.
Whilst we expect resolution to the US debt ceiling concerns, there are darker clounds looming ahead as macro conditions and credit fundamentals are anticipated to weaken. We used the market conditions in May to build liquidity and dry powder into the back half of the year. We took profit on bank FRNs and Tier 2 which have performed very well since Q4 2022. We replenished liquidity levels to above 10% awaiting good value primary issuance levels as opportunities to redeploy. Fund spread duration was shortened by 0.4 years as a result.
Yield levels in the Fund remain attractive hovering between 5.5% to 6.0% even as we have been lowering risk positions. Further increases in cash rates in the months ahead further boost income return for floating rate securities. As bond yields climb we start to see value in adding some interest rate duration to lock in higher yield levels for income investors, it also serves as a defensive buffer if risk markets wobble. The Fund’s strong allocations towards high quality investment grade credit, loans and selective Tier 2 securities have continued to outperform. We remain patient and significantly underallocated to ASX-listed hybrids and high yield.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-28.pdfApril, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.60% (net) and 0.66% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by 0.3% (net) in April, which returned 0.3% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.23% (gross) over the year, and 3.77% (gross) over a three year rolling period.
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.
Higher yielding credit sectors were beneficiaries in the more stable credit conditions where positive returns were largely supported by the higher level of income. We remain cautiously positioned with reduced allocations to sub investment grade, illiquid and heavily structured credit sectors moving into the latter stages of the credit cycle.
In April the additional income carry profile of the portfolio delivered outperformance from allocations favouring Australian investment grade credit and Tier 2 securities which outperformed bonds and cash. Bank senior and Tier 2 securities have resumed normal trading and end April around levels that existed prior to the March weakness. We observe deterioration in offshore credit conditions and therefore are inclined to begin profit taking on some of the senior and Tier 2 positions accumulated and higher spreads over the past 12 months to replenish liquidity to be in a position to take advantage of widening spreads and new issuance.
During April we took some profit on a swap rate positions implemented during March. In addition, we observe relatively benign conditions in VIX and CDS markets, so during the month we took the opportunity to add 0.3yrs spread duration of credit protection via US IG CDX.
Yield levels in the Fund remain attractive between 5.5% to 6.0%. Further increases in cash rates in the months ahead can boost income returns for floating rate securities. Interest rate duration remained conservatively positioned over the month below 0.2 years. The Fund’s strong allocations towards high quality investment grade credit, loans and selective Tier 2 securities have outperformed. We remain patient and under allocated to ASX-listed hybrids and high yield.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-27.pdfMarch, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned -0.48% (net) and -0.43% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by -0.76% (net) in March, which returned 0.28% on the month.
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.
Our minimised allocation to global high yield, and no allocation to Emerging Markets protected the portfolio from weakening credit returns. In addition, having fully divested from domestic listed hybrids was beneficial as they continued their run of underperformance for the calendar year, underperforming versus cash by -1.6% and underperforming higher ranking Tier 2 securities by -2.5% for the quarter.
After a strong start to 2023, part of the credit rally was given back during March as local credit spreads softened in sympathy with offshore credit events. The Fund was shielded from any direct return impacts from Silicon Valley Bank (SVB) and Credit Suisse, but negative contributions from a broader widening in spreads more than offset income generation for the month.
Yield levels in the Fund remain attractive between 5.5% to 6.0%. Further increases in cash rates in the months ahead can boost income returns for floating rate securities. Interest rate duration remained conservatively positioned over the month between 0.2 years and 0.3 years. The Fund’s strong allocations towards high quality investment grade credit, loans and selective Tier 2 securities have outperformed. Avoiding allocations to ASX-listed hybrids, emerging market corporate debt, and high yield has preserved capital as these sector spreads underperformed investment grade markets over the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-26.pdfFebruary, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 0.89% (net) and 0.94% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index (Benchmark) by 0.65% (net) in February, which returned 0.24% 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.
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 were attractive value has been on offer.
Our minimised allocation to global high yield and no Emerging Market (EM) exposure protected the portfolio. In addition, having fully divested from domestic listed hybrids was beneficial as they still appear poor value relative to other local credit.
Yield levels in the portfolio remain attractive at close to 6%. Further increases in cash rates in the months ahead with continue to boost income returns for floating rate securities. Interest rate duration remained conservatively positioned over the month between 0.2 - 0.3 years. The Portfolio's strong allocations towards high quality investment grade credit, loans and selective Tier 2 securities have materially outperformed. While avoiding hybrids, emerging market corporate debt, and high yield added value as these sectors had negative returns during the month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-25.pdfJanuary, 2023
The Janus Henderson Diversified Credit Fund (Fund) returned 1.27% (net) for the month. Over the last 12 months, the Fund has returned -0.22% (net).
Credit spreads tightened over the month. This, together with generous coupon income, helped buoy performance. Fixed rate credit outperformed floating rate notes given the fall in yields. The Fund’s exposure to swaps and fixed rate credit was a positive contributor in January, outperforming on a relative basis as swap rates outperformed bond yields.
Over 5% of liquidity was deployed into new primary supply which performed well in the market conditions. Allocations in made to bank Tier 2 in 2022 at attractive entry levels contributed positively, materially outperforming listed hybrids which underperformed cash. Our reduced allocations to less liquid and higher beta credit contributed positively as global loans and global high yield had a strong month. We hold no emerging market debt due to ongoing volatility, with concerns around genuine default risk due to global food and energy costs and pockets of global recession risk. We maintain a minimised hybrid allocation, which on a relative basis appears extremely poor value given spread tightening over the year. We have fully divested from ASX listed hybrids in favour of offshore unlisted hybrids which offer better compensation for risk.
Yield levels in the Portfolio remain elevated at around 5.5%. Further increases in cash rates will generate stronger returns over the coming years. Duration remained relatively steady over the month at 0.3 of a year and we will look to add interest rate duration as bond yields move above fair value. Given the buoyant risk sentiment to start the year we took the opportunity to buy credit protection hedging 0.4 years of spread duration to buffer the portfolio from swings in market sentiment.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-24.pdfDecember, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned 0.83% (net) for the month. Over the last 12 months, the Fund has returned -1.65% (net). Cash distributions have averaged 4.31% p.a. over the past three years.
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.
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.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-23.pdfNovember, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned 0.96% (net) for the month. Over the last 12 months, the Fund has returned -2.19% (net), while investors received 0.13% of franking credits. Cash distributions have averaged 4.26% p.a. over the past three years.
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.
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.
EM rallied significantly on the hope of a weakening USD and lower path of US rates. Our reduced cautious allocation to less liquid and higher beta credit saw only a modest positive contribution as high yield and global loans followed EM higher in the positive risk momentum. We hold no emerging market debt due to ongoing volatility with concerns around genuine default risk due to global food and energy costs and pockets of global recession risk. We have also minimised our hybrid allocation, which on a relative basis appears extremely poor value. Our up in quality trade into higher yield Tier 2 bank securities outperformed and was a positive contributor to performance.
Yield levels continue to oscilate around 6% and ongoing increases in cash rates will generate stronger returns from available yield income over the coming years. A near term rally in domestic bond yields was a positive contributor and we moved to take profit on overweight position reducing duration by about 0.5 of a year. As the initial negative reaction to the APRA capital call reminder subsided recent large allocations to fixed rate Tier 2 sub debt outperformed. By the end of the month we commenced some profit taking on the recent significant allocations as some bonds have now rallied between 50-70 basis points through the combination of credit spread and swap rates.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-22.pdfOctober, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned 0.11% (net) for the month. Over the last 12 months, the Fund has returned -2.92% (net), while investors received 0.13% of franking credits. Cash distributions have averaged 4.14% over the past three years.
Yield levels continue to oscilate between 5.5 to 6% and ongoing increases in cash rates will generate stronger returns from available yield income over the coming years. A near term rally in domestic bond yields was also a postive contributor in October as we averaged 1.2 years duration. We opted to reduce this position as yields rallied. Meanwhile widening bond swap spreads were a headwind for fixed rate credit returns offsetting part of the gain from rallying domestic bond yields.
New primary issuance by major banks in the last week of October triggered broader market spread widening in credit resulting in negative contributions to return from short term spread changes. In terms of positioning the new issue concession offered in the new CBA Tier 2 priced 25 basis points above prevailing secondary levels. The silver lining of the further lift in credit spreads is that it offers attractive entry points for investment in new credit issuance. With that in mind we added allocations into the new CBA Tier 2 notes with a yield of 6.9% on the fixed rate tranche at a spread of 2.7% which is only 15bps lower than the new CBA hybrids also issued in October. We took this opportunity to rotate out of low margin subdebt into high new issue spreads providing better protection against extension risk. This proved timely with APRA providing a reminder shortly after to investors and issuers about sensible pricing for capital instrument structural features and inherent risks.We elected not to purchase the hybrids which in our view should price 150-200bps wider than Tier 2. We favour being positioned up in Tier 2 for similar margins, or unlisted global market hybrids with margins currently between 4-6% rather than the 2.5-2.9% available in ASX listeds. The yield on the Fund remains just shy of 6%, even as we are positioned up in investment grade with a fair degree of dry powder to capitalise on further weakening in risk sentiment. We retain allocations to cash, and less than 10% sub investment grade exposure.
We continue to favour being positioned up in quality and seniority in capital structures. Our underweight to high yield and loans detracted from performance over the month given the recent capital stability in these assets and high income generation. We also hold no emerging market debt and have reduced our hybrid allocation, which on a relative basis has preserved capital for the Fund.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-21.pdfSeptember, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -0.55% (net) for the month. Over the last 12 months, the Fund has returned -3.46% (net), while investors received 0.13% of franking credits. Cash distributions have averaged 4.09% over the past three years.
Healthy yield levels and ongoing increases in cash rates are starting to generate stronger returns from available yield income. The longer the market holds at higher cash rate expectations this benefit should flow through each month for investors. Favoured allocations up in quality credit sectors, are cushioning the impact relative to other sectors which have underperformed to a much larger magnitude. This is a deliberate position to navigate through the tightening policy environment. The recent reallocation into new Tier 2 outperformed during September despite a weaker environment for bond yields and broader credit spreads. Corporate credit spread widening was a detractor for the month, while the two new major bank Tier 2 issues have settled about 30-40 bps tighter in spread in the same period showing the value of active relative value even in tough market conditions. respectively denoting a very attractive entry point for investors. Domestic listed hybrids were the top performing local credit class with retail investors continuing to show demand, defying the gravity of rising credit spreads and falling equity markets. We think it's just a matter of time until sensible relative pricing across credit classes is restored. The exposure to ASX listed hybrid spread duration is 0.00 years. We favour being positioned up in Tier 2 for similar margins, or unlisted global market hybrids with margins currently between 4-6% rather than the 2.5-2.9% available in ASX listeds. The yield on the Fund remains just shy of 6%, even as we are positioned with a fair degree of dry powder to capitalise on further weakening in risk sentiment. We hold more elevated allocations to cash, and less than 10% sub investment grade exposure.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-20.pdfAugust, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned 0.55% (net) for the month. Over the last 12 months, the Fund has returned -2.78% (net), in addition investors received 0.13% of franking credits. Cash distributions have averaged 4.07% over the past three years.
We undertook a major reallocation within the portfolio of 11% into new Tier 2 deals from NAB and ANZ in the past 5 weeks. We identified strong relative value and potential for capital gains from sub debt relative to hybrids or senior bonds. The two new issues represent the highest margin major bank Tier 2 notes available in the market at 2.8% and 2.7% respectively denoting a very attractive entry point for investors. We also favoured fixed rate tranches which we identified as having the potential to deliver superior capital gains as the market attracts buyers looking for 6-6.5% yields from BBB+ rated credit. The yield on the Fund remains healthy between 5-6%, even as we are positioned with a fair degree of dry powder to capitalise on further weakening in risk sentiment. We hold more elevated allocations to cash, and less than 10% sub investment grade exposure.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-19.pdfJuly, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned 1.09% (net) for the month. Over the last 12 months, the Fund has returned -3.23% (net), in addition investors received 0.13% of franking credits. Cash distributions have averaged 4.05% over the past three years. 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/JanusHendersonDiversifiedCreditFund_MonthlyReport-1-5.pdfJune, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -1.19% (net) for the month. Over the last 12-months, the Fund has returned -4.00% (net), in addition investors received 0.13% of franking credits.
Cash distributions have averaged 4.07% over the past three years, and the Fund has returned 2.25% p.a. (net) including franking credits over the same period. Higher than expected inflation in the United States saw the Federal Reserve (Fed) respond with an outsized tightening and preparedness to push the US economy into recession to quell inflation if needed. The Reserve Bank of Australia (RBA) moved in a similar fashion and against this backdrop, yields surged higher across the curve. Risk appetite fell on rising recession risks with equity and credit markets significantly weaker.
Short-term money market yields continued to rise, reflecting the shift by central banks to more front-end load tightening cycles. The three-month bank bill yield ended the month 64bps higher at 1.81%, while six-month bank bills ended 75bps higher at 2.67%. In terms of the tightening cycle, markets are looking for a 3.10% cash rate by year end and around 3.75% by mid-2023 Hawkish central banks and fears that tightening financial conditions could trigger a recessionroiled credit markets. The Australian iTraxx Index widened sharply, closing the month 35bps
wider at 130bps. The Australian fixed rate credit market returned -1.34%, negatively influenced by rising bond yields and spreads, while floating rate credit recovered slightly from the weight of bank supply in May to post a positive 0.05% return as primary issuance was largely absent. Income profiles are lifting, and carry remains the main positive contributor to Fund returns whilst volatility persists. Duration exposure and credit allocations both contributed negatively given the rise in yields and broad weakness in credit spreads. After favouring floating rate sectors heading into 2022, our active repositioning to decrease hybrids and loans exposure throughout this year whilst these markets were outperforming is beginning to payoff. Hybrid spreads began to widen quickly in the face of new supply and irrational relative value to Tier 2 subordinated notes.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-18.pdfMay, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -1.05% (net) for the month. Over the last 12-months, the Fund has returned -2.31% (net), in addition investors received 0.15% of franking credits.
Cash distributions have averaged 4.02% over the past three years, and the Fund has returned3.02% p.a. (net) including franking credits over the same period. Convicted moves and signaling by central banks to front-end load monetary policy tightening cycles look to have capped the rise in offshore and domestic yields. After peaking earlier in the month, yields began to fall as the focus shifted from central bank inflation-fighting resolve to the consequences of tighter policy for growth. Equity and credit markets were weaker, while inflation expectations edged lower. At the shorter end of the yield curve, money market yieldsrose as nearer-term monetary tightening was factored in. The three-month bank bill yield ended the month 46.5 basis points (bps) higher at 1.18%, while six-month bank bills ended 47bpshigher at 1.93%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-1-4.pdfApril, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -0.93% (net) for the month. Over the last 12 months, the Fund has returned -1.04% (net), in addition investors received 0.15% of franking credits. Cash distributions have averaged 3.87% over the past three years, and the Fund has returned 3.44% p.a. (net) including franking credits over the same period. Offshore and domestic yields continued to rise, reflecting inflation pressures and expectations for a more aggressive and front-end loaded central bank tightening cycle. Risk appetite soured, with equity and credit markets softer, while inflation expectations edged upwards. Three consecutively higher core inflation readings provide the Reserve Bank of Australia (RBA) with the smoking gun needed for a May lift-off in the cash rate. The short-term money market continued to reflect the pivot to an earlier start to a large tightening cycle. The three-month bank bill yield ended the month 48 basis points (bps) higher at 0.71%, while six-month bank bills ended 75bps higher at 1.45%. The three-year government bond yield rose as tightening expectations were brought forward and ended 37bps higher at 2.71%.
Risk sentiment continued to be impacted by the prospect of aggressively tightening financial conditions to tackle inflation, with consequent negative implications for medium-term growth. Global credit markets led the domestic market lower. The Australian fixed and floating rate credit indices closed 9bps and 6bps wider respectively, while the Australian iTraxx Index widened 14bps to 95.5bps. Returns across the investment universe were generally negative with rising yields and widening spreads generating negative returns and offsetting income benefits. Our favoured allocations to floating rate sectors of hybrids and global loans continued to outperform, but we anticipate they may soon follow the broader markets wider in spread
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-17.pdfMarch, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -0.93% (net) for the month. Over the last 12 months, the Fund has returned 0.42% (net), in addition investors received 0.15 of franking credits. Cash distributions have averaged 3.79% over the past three years.
Offshore and domestic yields rose sharply following hawkish commentary from the US Federal Reserve (Fed) after its first tightening. Inflation expectations rose as the impact of Russia’s invasion of Ukraine on global supply chains, commodities, and energy prices became more apparent. Risk appetite initially fell, only to later recover. Despite the Reserve Bank of Australia’s (RBA) patient stance, the three-year Australian government bond yield rose to as high as 2.47% as inflation fears saw markets factor in aggressive RBA monetary tightening. Despite a late-month rally, the three-year government bond yield ended at an unprecedented 80 basis points (bps) higher at 2.34%.
The Australian bond market was down -3.75%, one of the largest monthly falls in four decades. Australian fixed and floating rate credit spreads were +18bps and +17bps wider during March. Returns across the investment universe were generally negative with widening spreads offsetting income benefits. Our favored allocations to floating rate sectors of hybrids and global loans were outperformers
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonCashFund-Institutional_MonthlyReport-16.pdfFebruary, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -0.34% (net) for the month. Over the last 12 months, the Fund has returned 1.52% (net), in addition, investors have received 0.15% of franking credits. Cash distributions have averaged 3.74% over the past three years. Fears of protracted warfare and sharp rises in commodity prices which likely prevent global central banks from deviating from their monetary tightening plans saw a significant negative reaction in global credit spreads. Returns were sharply negative across higher beta fixed-rate credit sectors. Emerging markets were particularly hard hit given the exposure to Russia and neighboring trade partners.
Our active and defensive approach has seen the Fund have very conservative allocations to these sectors in anticipation of rising volatility and modest risk-adjusted yields. The Fund maintained a defensive posture with less than 1% allocated to EM and only 3% exposure to global high yield. European loans posted their first negative monthly return for two years as the proximity and interconnected trade with Russia will disproportionately impact regional growth.
Very few sectors were immune from underperformance, but allocations to domestic hybrids helped buffer investors in February despite ANZ and CBA both coming to refinance at spreads of 2.70% and 2.75% respectively as we had anticipated. We have continued to reduce positioning and sensitivity to domestic hybrids due to richness in relative value. The sharp rise in front-end bond yields was also a modest negative contributor as the Fund had a small 0.71 years duration position as rates rose. Having built up a 1.0 year CDS protection hedge late in 2021, these proved very effective in contributing an additional 16 basis points (bps) of positive return in the weaker environment and have positively contributed 0.29% over the past two months.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-16.pdfJanuary, 2022
The Janus Henderson Diversified Credit Fund (Fund) returned -0.18% (net) for the month. Overthe last 12 months, the Fund has returned 1.81% (net). Cash distributions for the Fund haveaveraged 3.77% over the past three years. A hawkish pivot by the US Federal Reserve (Fed) in the face of persistent inflation drove yieldshigher. In turn, higher US yields spurred risk-off sentiment in equity and credit markets.Australian yields rose following offshore leads and strong domestic inflation readings. Creditmarkets became more volatile and risk sentiment soured following the Fed’s hawkish pivot andrising geopolitical instability in Eastern Europe. The Australian iTraxx Index closed 12 basispoints (bps) wider in sympathy with falls in equity markets.
Australian fixed and floating rate credit indices closed unchanged and 1bps wider respectively,outperforming the weakness in CDS and equity markets. Returns across the investmentuniverse were generally negative with widening spreads offsetting income benefits, credit FRNsreturned 0.01%, subordinated notes fell 0.06% and hybrids fell 0.51%. Fixed rate credit alsohad slightly negative excess returns of -0.04% versus government bond equivalents, but thiswas largely due to interest rate movements as swap rates widened versus government yields.The three-year government bond yield rose by 40bps to end at 1.31%. Markets moved to factorin an imminent and aggressive tightening cycle by the Reserve Bank of Australia (RBA).Rising US bond yields and repricing of withdrawal of Fed liquidity drove spreads wider andreturns sharply negative across higher beta fixed rate credit sectors. Global high yield andemerging market hard currency bonds fell 2.50% and 1.75% respectively. Our active anddefensive approach has seen the Fund have very conservative allocations to these sectors inanticipation of rising volatility. The Fund maintained a defensive posture with only 4% allocatedacross these sectors out of a maximum range of 35%. As outright yields adjust to provide morecompensation for term premia and liquidity, we would consider re-entering high yield, but for themoment we remain judicious around the use of risk budget in this transitional phase in bondmarkets and central bank policy trajectory.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-14.pdfDecember, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.27% (net) for the month. Over the last 12 months, the Fund has returned 2.42% (net), in addition investors received 0.15% of franking credits. Cash distributions for the Fund have averaged 3.81% over the past three years. Investor concerns shifted between fretting about inflation and the timing and speed of offshore central bank tightening, to calibrating the impacts of the rapidly spreading Omicron variant. There was some flattening in the yield curve, with shorter-dated yields higher and longer-dated yields mixed. In credit markets, sentiment was sensitive to Omicron news flow, which also coincided with reduced liquidity and conservative investor positioning ahead of the holiday season. While early findings are for lower severity as it relates to health outcomes, the sheer contagiousness of Omicron has resulted in mobility restrictions being reimposed globally, with associated negative impacts on economic activity expected going into 2022.
Credit markets have largely shrugged off this new phase of the pandemic, alongside inflation and tapering/rate hike concerns, preferring to remain focused on solid fundamentals and a broad-based economic recovery. Amid elevated volatility, the Australian iTraxx Index initially widened, before closing the month 10 basis points (bps) tighter. Both domestic fixed and floating rate credit spreads widened by 2bps. Returns across the domestic investment universe were positive. Australian credit FRNs returned 0.04%, subordinated notes returned 0.36% and hybrids outperformed returning 1.07%, while fixed rate credit had excess returns of 0.30% as swap rates compressed versus government yields
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-13.pdfNovember, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.21% (net) for the month. Over the last 12 months, the Fund has returned 3.06% (net), in addition investors received 0.15% of franking credits. Cash distributions have averaged 3.84% over the past three years.
Dovish commentary from the Reserve Bank of Australia (RBA) and less hawkish than expected behaviour from offshore central banks was confronted by high inflation prints coming out of the US, Europe and Asia. Domestically, the reopening of the eastern states saw early-stage recovery underway with promising economic activity. Higher COVID-19 cases entering winter in the northern hemisphere resulted in lockdowns for the Netherlands, Slovakia and Austria and rising cases elsewhere in Europe and parts of Asia. These factors added volatility and has seen underlying market liquidity diminish. Credit markets grappled with inflation pressures, higher rate expectations, and a surge of COVID-19 cases in the northern hemisphere. A noticeable risk-off tone developed towards month-end.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-12.pdfSeptember, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.15% (net) for the month. Over the last 12 months, the Fund has returned 5.88% (net), in addition investors received 0.15% of franking credits. Cash distributions have averaged 3.8% over the past three years. In a more challenging return environment, the Fund delivered pleasing outperformance and positive returns. The Australian bond market fell by 1.51%, floating rate credit market fell by 0.06% and equities and global high yield indices were also down. Favourable portfolio positioning across floating rate sub sectors such as bank Tier 2 and hybrids, as well as global secured loans all remained in positive return territory.
Credit markets were cautious due to US Federal Reserve tapering speculation, and the potential for the default of the major Chinese property developer, Evergrande. A shift to a more hawkish stance by offshore central banks, higher energy prices and disruptions to global supply chains led to heightened financial market volatility. The confirmation in September of an early wind-down of the Committed Liquidity Facility (CLF) for the banking system was also a market moving event as balance sheet demand shifted to support semi-government bonds at the expense of senior bank notes and RMBS
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-1-2.pdfAugust, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.08% (net) for the month. Over the last 12 months, the Fund has returned and 5.73% (net), which is 5.69% above the Bloomberg AusBond Bank Bill Index (Benchmark), in addition investors received 0.15% of franking credits. Cash distributions have averaged 4.0% over the past three years. Offshore investment grade returns were hampered by a modest rise in US bond yields, while higher yielding markets rebounded from recent weakness as the threat of imminent Fed tightening and Delta related fears abated. While a strong Aussie earnings season provided fundamental support, a clear theme was an increasing focus on shareholder-friendly activity to support earnings. This has included record dividends and share buy-backs, aided by additional debt issuance. The Australian iTraxx Index ended the month 4 basis points (bps) tighter reflecting offshore moves, while Australian fixed and floating rate credit indices closed 1bp wider and 1bp tighter respectively as they face a period of increasing supply ahead. The broader ASX listed hybrid market weakened, returning -0.01% for the month, due to recent supply from Macquarie, Westpac and Suncorp. In terms of demand for the new notes, the bank deals were very well supported (4-5x oversubscribed) and it was tough for investors to get an allocation showing demand is rife for decent levels of more reliable income. This suggests to us that hybrid returns should bounce back in the near term and we remain constructive.
Despite the mixed return environment for credit, Fund returns remained positive. Floating rate secured loan allocation provided positive performance, while the rebound in global high yield spreads also provided a modest positive contribution to return. Top performers in the domestic allocations included NAB unlisted hybrids which were stable during August, while new positions in Tier 2 primary from CBA rallied post issuance
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-11.pdfJuly, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.29% (net) for the month, while the Bloomberg AusBond Bank Bill Index (Benchmark) was flat.
Over the last 12 months, the Fund has returned 6.65% (net), which is 6.60% above the Bloomberg AusBond Bank Bill Index (Benchmark). In addition, investors received 0.15% of franking credits, while cash distributions have averaged 4.0% over the past three years. A downward revision to the growth outlook following ‘Delta’ strain outbreaks led to sharp falls in domestic yields and a flattening in the yield curve. A strong offshore earnings season helped support risk appetite, with the domestic equity market firmer. After a strong run, credit markets softened, with a modest widening in global spreads
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-10.pdfJune, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.55% (net) for the month, while
the Bloomberg AusBond Bank Bill Index (Benchmark) was flat.
Over the last 12 months, the Fund has returned 7.70% (net), which is 7.64% above the Benchmark. In addition, investors received 0.15% of franking credits, while cash distributions were 7.23%. Over the past three years, the Fund has returned net of fees 4.37% p.a. above bank bills including franking, and has exceeded its performance objectives over all longer time periods.
Domestic credit markets appeared to take major city lockdowns and increased volatility in bond yields in their stride. Buoyed by the economic recovery and increasing system liquidity as final Term Funding Facility (TFF) borrowings were drawn by the banks, credit spreads tightened 4 basis points (bps) providing a modest boost to returns. S&P’s upgrade of Australia’s AAA rating outlook to stable, combined with their favourable commentary around Australia’s banking industry country risk assessment (“BICRA”) provided fundamental support across bank capital notes, with the listed hybrid market posting a stellar month, returning 1.0% into financial year end. Global credit markets with exposure to US dollar duration also performed well as longer bond yields rallied, both global high yield and hard currency EM corporate debt produced returns above 0.8%.
Returns were positive across most of the credit complex during June. Corporate debt allocations added 44bps to return as Tier 2 bank notes and corporate spreads rallied. Hybrid allocations contributed 19bps as capital gains from spread tightening also lifted returns. Global allocations contributed 9bps to return, with loan markets lagging a touch after a strong prior month.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-9.pdfMay, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.23% (net) for the month, while the Bloomberg AusBond Bank Bill Index (Benchmark) was flat. Over the last 12 months, the Fund has returned 8.74% (net), which is 8.68% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 7.11%. Over the past three years, the Fund has returned net of fees 4.42% p.a. above bank bills including franking, and has exceeded its performance objectives over all longer time periods.
After the ebb and flow in bond yields and heavy primary supply since February, the local credit market enjoyed a period of relative calm in May. iTraxx Australia CDS traded in a fairly tight range, settling 2bps tighter at 59bps. Additional income available from credit was complemented by a modest tightening in spreads assisting positive excess returns. In Australia, bank floating rate note (FRN) spreads tightened by 3bps, while fixed rate corporate credit spreads rallied 3bps but some of this benefit was offset by a widening in asset swap rates versus government bonds. Higher yielding floating rate sectors, like global loans performed well, returning 0.6%. Local subordinated bank notes also outperformed, returning 0.5%, outpacing listed hybrids which returned -0.2% which gave back some of their very strong April rally.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-7.pdfApril, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.53% (net) for the month, while the Bloomberg AusBond Bank Bill Index (Benchmark) was flat. Over the last 12 months, the Fund has returned 11.01% (net), which is 10.94% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 5.69%. The Fund has exceeded its return objective over all time periods including a three year net return of 4.26% p.a. above bank bills including franking.
Credit markets outperformed even though there was significant global primary supply as corporate issuers sought to take advantage of the low yield environment to lock in longer-term borrowing. In Australia, bank floating rate note (FRN) spreads tightened by 3bps, while fixed rate corporate credit spreads rallied 4bps generating 0.3% excess returns above government bonds. Higher yielding spread sectors performed well, global high yield, EM credit and loan sectors delivering returns between 0.5-1.0%. ASX listed bank hybrids also performed well returning 0.9% during April including franking
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-6.pdfMarch, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.15% (net) for the month, while the Bloomberg AusBond Bank Bill Index (Benchmark) was flat. Over the last 12 months, the Fund has returned 13.89% (net), which is 13.78% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 5.84%. The Fund has exceeded its return objective over all time periods including a three year net return of 4.16% p.a. above bank bills including franking.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-5.pdfFebruary, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned -0.05% (net) for the month, while the Bloomberg AusBond Bank Bill Index (Benchmark) return was flat.
Over the last 12 months, the Fund has returned 7.10% (net), which is 6.89% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 4.98%. The Fund has exceeded its return objective over all time periods and over the past three years, has returned net of fees 3.95% p.a. above bank bills including franking.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-4.pdfJanuary, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 0.42% (net) for the month. This compares to the Bloomberg AusBond Bank Bill Index (Benchmark) which was flat. Allocations to bank hybrids and subordinated debt, as well as secured loans were the top contributors for the month.
Over the last 12 months, the Fund has returned 6.73% (net), which is 6.44% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 4.55%. The Fund has exceeded its return objective over all time periods and over the past three years has returned net of fees 3.88% above bank bills including franking.
Expectations for a post-vaccine global rebound were buoyed by further proposed fiscal easing from the new Biden Administration and US Federal Reserve (Fed) signalling of a long period of accommodative monetary settings. Burgeoning sovereign debt supply saw yield curves steepen and inflation expectations edged higher. Front end rates remained anchored by an extended period of highly accommodative policy from the Reserve Bank of Australia (RBA). Three-month bank bills ended the month unchanged at 0.01% and three-year government bond yield ended the month at 0.11%. Longer-dated government bond yields continued to lift and inflation expectations were revised up, the 10-year government bond yield ended the month 16 basis points (bps) higher at 1.13%.
The year started on a positive note for credit markets despite uncertainty over another round of state border closures. Reinvestment of bank senior maturities and cash built up over the holiday period saw spreads rally on both floating rate financials and corporate bonds as the alternative of sitting in cash at 0.0% remains undesirable for investors. The prospect of global reflation and rising rate environment saw floating rate credit markets outperform fixed rate. Bank floating rate note (FRN) spreads rallied 3bps lifting sector returns to 0.09%, while spreads on corporate investment grade bonds tightened 5bps helping lift returns into positive territory despite rising bond yields. Higher spread sectors like bank hybrids and subordinated debt outperformed returning between 0.2-0.7% as a reasonable level of income remains in high demand. Cash bonds outperformed synthetic indices, with the iTraxx Australia Index widening 7bps in spread to 63bps following weakening in offshore derivatives over the month. Global investors showed greater appetite for floating rate loans and flows into fixed rate high yield bonds slowed. After lagging the late 2020 rally, both US and European loans were the top performing credit sectors in January as spreads rallied and converged toward global high yield and emerging markets.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-3.pdfDecember, 2020
The Janus Henderson Diversified Credit Fund (Fund) returned 0.89% (net) for the month. This compares to the Bloomberg AusBond Bank Bill Index (Benchmark) which was flat. Over the last 12 months the Fund has returned 6.73% (net), which is 6.36% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 4.04%. Pleasingly in a volatile year the Fund returned 7.46% (gross), which materially outpaced the returns available from underlying credit markets while maintaining a predominantly investment grade exposure and exhibiting relatively constrained drawdown in the March selloff. Active allocation added 1.4% over the year, while active security selection across Australian investment grade, hybrids and global high yield added an additional 3.1%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-2-1.pdfNovember, 2021
The Janus Henderson Diversified Credit Fund (Fund) returned 1.70% (net) for the month. This compares to the Bloomberg AusBond Bank Bill Index (Benchmark) return of 0.01%. Over the last 12 months the Fund has returned 6.26% (net), which is 5.82% above the Benchmark. In addition, investors received 0.14% of franking credits, while cash distributions were 3.48%.
Risk appetite surged on positive vaccine announcements and allowed markets to look through surging European and US COVID-19 infection rates. Equity markets roared ahead, delivering double digit returns in many countries. Positive sentiment cascaded over into credit markets, where spreads continued to tighten and there was also a lift in inflation expectations. The additional income and return available from credit markets remained attractive and returns for the month were buoyed by a decent tightening in credit spreads producing capital gains for well positioned investors. Australian corporate bond spreads rallied 18 basis points (bps) with COVID-19 impacted sectors like Airports, Airlines, and REITs performing the strongest on vaccine and border reopening news.
Higher beta markets all performed strongly as effective vaccines ignited the reflation trade, with global high yield, global loans and emerging markets producing monthly returns between 2-4% as investors chased the spread compression in “left behind” sectors like Energy, Consumer cyclical and Leisure.
All of our credit allocations contributed positive returns during November, with our global high yield allocation outperforming, delivering 5.0% for the month. Our favoured stock selection in longer tenor IG corporate credit paid off with holdings in local REIT and Airport bonds generating returns north of 3.5%, allowing the Fund return to keep pace with lower grade market returns while owning much less sub investment grade exposure
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonDiversifiedCreditFund_MonthlyReport-1.pdfOctober, 2020
The Janus Henderson Diversified Credit Fund (Fund) returned 0.78% (net) for the month. This compares to the Bloomberg AusBond Bank Bill Index (Benchmark) return of 0.01%. Over the last 12 months the Fund has returned 4.73% (net), which is 4.22% above the Benchmark, and in addition, investors received 0.14% of franking credits.
Fiscal and prospective conventional and unconventional monetary easing helped buffer Australian asset markets from rising volatility caused by a COVID-19 resurgence in the Northern hemisphere and the upcoming US election. The Australian equity market outperformed offshore markets, credit spreads continued to narrow and there was a modest lift in inflation expectations. Despite jitters offshore, Australian credit markets regained their mojo with the iTraxx Index tightening 6 basis points (bps) to 70bps and corporate bond spreads rallying 8bps, generating healthy returns for credit investors.
The Australian corporate bond market outperformed its higher beta global counterparts delivering 0.56% versus emerging market corporate bonds, global high yield, and loans which produced modest positive returns. Listed hybrid spreads widened 7bps on average as three smaller deals had to be absorbed by the market, which allowed Tier 2 securities to outperform as investors looked for alternative exposure to the major banks now that senior spreads are very low.
All of our credit allocations contributed positive returns during October, with stock selection across Australian IG, Australian hybrids, and loans adding an additional 0.44% return above the already positive tone in credit markets. Top contributors were National Income Securities (NABHA) which returned 4.9% as NAB will seek approval at their upcoming AGM to redeem the securities at par, and our selective positioning in longer tenor corporate bonds and subordinated debt from issuers less impacted by COVID. The Fund’s investment grade holdings returned 0.78%, outperforming the corporate market by 0.22%, and our hybrid holdings returned 0.69%, outperforming the listed market by 0.37%.
ticker: IOF0127AU
commentary_block: Array
factsheet_url:
Janus Henderson Diversified Credit Fund – Monthly Report
https://www.janushenderson.com/en-au/investor/product/janus-henderson-diversified-credit-fund/
release_schedule: Monthly
fund_features:
Janus Henderson Diversified Credit Fund seeks to achieve a total return before fees that exceeds the total return of the Benchmark by 2.00% p.a. over rolling three year periods. The Fund will typically invest in a diversified portfolio of Australian and global investment grade and sub-investment grade securities, which can be listed or unlisted.
- May have exposure to non-Australian dollar denominated securities including exposure to non-Australian debt issuers.
- Derivatives may be used solely for investment and risk management purposes and cannot be used to gear the Fund.
- Considered a medium investment risk.
- Suitable for investors who are comfortable to invest for at least three years.
manager_contact_details: Array
asset_class: Fixed Income
asset_category: Diversified Credit
peer_benchmark: Fixed Income - Diversified Credit Index
broad_market_index: Global Aggregate Hdg Index
structure: Managed Fund