September, 2023
The Janus Henderson Tactical Income Fund (Fund) returned -0.04% (net) and 0.00% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 0.56% (net) in September, which returned -0.60% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 2.63% (net) over the year, and 1.12% (net) since inception per annum.
Primary markets globally saw a raft of new issuance. Notable local transactions included Westpac who issued a $2.4 billion five-year AA- rated senior unsecured bond at a credit spread of 93bps, and 5% coupon. Leading general insurer Suncorp Group issued a $600m A- rated Tier 2 floating rate note callable in 5.75 years at a credit spread of +235bps above swaps, yielding comfortably above 6% which was well oversubscribed. Sydney toll-road group WestConnex returned to the market with its second Australian Dollar denominated bond transaction. Rated BBB+, this $550m seven-year fixed rate bond was issued at an attractive credit spread of +170bps and a healthy yield of 6.15% for defensive monopolistic infrastructure assets.
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.
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.
While not being completely immune to the significant sell off in long duration bonds, for the most part the Tactical Income Fund successfully protected capital over the month. By preserving capital during these periods means it is easier to deliver overall stronger returns over the year. The duration position of the Tactical Income Fund was broadly unchanged in September with duration at 1.69 years at month end.
We remain overweight credit but have moderated positioning as we look for further opportunities and keep powder dry. We have also added credit protection through credit default swaps, creating a high-quality liquid buffer to take advantage of dislocations / opportunities.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-32.pdfAugust, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.77% (net) and 0.81% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 0.21% (net) in August, which returned 0.56% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 2.11% (net) over the year, and 1.09% (net) since inception per annum.
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.
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.
Navigating duration is nuanced and requires active management. After beginning April with a slight negative duration position, we started to see some value presented in bond yields and accelerated repositioning late in June moving to 1.57 years by the end of July. We have continued to chip away at this position in August, taking the position to 1.66 years by month end.
We remain overweight credit but have moderated positioning as we look for further opportunities and keep powder dry. We have also added credit protection through credit default swaps, creating a high-quality liquid buffer to take advantage of dislocations / opportunities.
With higher yields on offer, returns in the Tactical Income Fund should continue to move higher by virtue of its starting point and with successful active management.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-31.pdfJuly, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.61% (net) and 0.65% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 0.16% (net) in July, which returned 0.45% over the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 2.61% (net) over the year, and 1.08% (net) since inception per annum.
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.
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.
The Fund had another strong positive return in this month, outperforming its Benchmark significantly. This is on the back of a strong FY23 return for the Fund which delivered 4.88% (net of fees) outperforming bonds, cash and credit floating-rate note (FRN) market benchmarks over the past 12 months.
Turning points in policy can be tricky for markets to price, but we continue to remain active. We have added duration at much better yield levels. After beginning April with a slight negative duration position, we have started to see some value presented in bond yields and accelerated repositioning late in June moving to 1.6 years by the end of July.
More recently, the Fund has also been profit taking into the rally in spread sectors. We actively moved overweight in bank credit, longer semi government positions, and swap rate positions during 2022 when spreads were cheap and elevated well above average. These positions have contributed strongly to performance over the last few months. At this juncture we remain overweight but have moderated positioning as we look forward for further opportunities and keep powder dry.
With higher yields on offer, returns in the Tactical Income Fund should continue to move higher by virtue of its starting point and with successful active management.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-30.pdfJune, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.34% (net) and 0.38% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 1.17% (net) in June, which returned -0.83% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 2.77% (net) over the year, and 1.07% (net) since inception per annum.
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.
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.
A positive return in June capped off a strong FY23 return for the Fund which delivered 4.88% (net of fees) outperforming bonds, cash and credit floating-rate note (FRN) market benchmarks over the past 12 months. Performance is pleasing when assessed against the fact that bond markets underperformed cash again in FY23, after a horrendous FY22. Bond markets also delivered a majority of negative monthly returns over the last 12 months with the largest monthly drawdown being -2.5%. Conversely, the Fund delivered investors a majority of positive monthly returns with less drawdown.
Turning points in policy can be tricky for markets to price, and over the FY we saw the bond market exhibit extremely volatile monthly returns. The Australian bond market returns were negative six times over the course of the past year, with a return range of -1.36% to -2.54% each time it occurred even with higher income yields. The results delivered by the Tactical Income Fund are a good reminder of the value of active duration management and credit selection, providing outperformance and a smoother journey for investors across the year.
The decisions to add/take away duration are highly complex and challenging. Over the past 12 months we have managed through the largest duration adjustments since the Fund’s inception. The Fund had almost 4 years interest rate duration at the start of FY23, then trimmed half of that taking profit on one of the strongest bond market rallies seen in years. This year, the Fund moved close to 0 years duration after Credit Suisse/SVB and whilst optically it was a nonconsensus strategy, the positioning was vindicated as it protected investors capital against the bond market which has sold off heavily since then as three- and 10-year government bond yields ended the quarter 110bps and 73bps higher. The Fund delivered 1.23% (net) versus the bond market (Bloomberg AusBond Composite 0+ Year Index) falling by -2.95% over the quarter. Now that the Fund has maintained capacity, we are actively adding duration at much better yield levels. After beginning the quarter with a slight negative duration position, we have started to see some value presented in bond yields and accelerated repositioning late in June moving to 1.4 years.
The Fund has also been profit taking into the rally in spread sectors. We actively moved overweight in bank credit, longer semi government positions, and swap rate positions during 2022 when spreads were cheap and elevated well above average. These all added strongly to the FY result via higher income and capital gains from spreads tightening. At this juncture we remain overweight but have moderated positioning as we look forward for further opportunities.
The future looks challenging from a number of fronts, we remain guarded on taking excessive low-quality risks favouring actively managing better credit quality assets with plenty of powder dry to add exposure into any weakness.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-1-1.pdfMay, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.32% (net) and 0.35% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 0.78% (net) in May, which returned -0.46% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.05% (net) over the year, and 0.99% (net) since inception per annum.
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.
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.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-29.pdfApril, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.57% (net) and 0.60% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 0.32% (net) in April, which returned 0.25% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 0.2% (net) over the year, and 0.94% (net) since inception per annum.
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.
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.
The strong performance result in April for the Fund, despite bond yields tracking higher, is a good reminder of why simply adding duration to portfolios isn't as straight forward as it sounds. Our Tactical management of duration (kept very low in April) was vindicated. While we prefer structurally more duration as the economy enters the later stages of the cycle, it pays to be patient. In addition, we took the opportunity to add some credit protection.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-28.pdfMarch, 2023
The Janus Henderson Tactical Income Fund (Fund) returned -0.20% (net) and -0.16% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by -1.92% (net) in March, which returned 1.72% on the month.
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.
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.
Despite the Fund avoiding any idiosyncratic issues, performance in March was hindered by overall credit exposures as markets were roiled by the collapse of Silicon Valley Bank (SVB) and the forced merger between Credit Suisse and UBS. That said, this month’s weaker result follows strong performance in December, January and February, and the higher underlying yield baked into portfolios helped buffer performance. The Fund commenced adding duration in early March, however, it took a small amount of profit when the risk-off events occurred as the markets briskly moved to pricing in near-term monetary policy easing. Having no duration in the Fund did not provide the offset to spread sector weakness (including credit) that it would have otherwise given the fall in risk-free yields.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-27.pdfFebruary, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.64% (net) and 0.67% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by 1.18% (net) in February, which returned -0.54% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term, including by 2.26% (net) over the year, and 1.08% (net) since inception per annum.
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 bonds 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.
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 we believe they still appear poor value relative to other local credit.
Overall, February was a good month for performance, following on from a strong December and January result. Active management was fruitful in the backdrop of a weaker performance month for most sectors within fixed income. The Fund has remained cautious on duration, pairing back duration to near zero. This has helped preserve capital given the back up in yields in February. High coupon income and selective rotation in subsectors of credit enhanced returns. Looking forward, the high yields now built into portfolios are already assisting performance and we expect this to continue in 2023.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-26.pdfJanuary, 2023
The Janus Henderson Tactical Income Fund (Fund) returned 0.68% (net) and 0.72% (gross). The Fund underperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by -0.83% (net) in January, which returned 1.51% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.58% (net) over the year, and 0.99% (net) since inception per annum.
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.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-25.pdfDecember, 2022
The Janus Henderson Tactical Income Fund (Fund) returned 0.62% (net) and 0.66% (gross). The Fund outperformed the 50% Bloomberg AusBond Bank Bill; 50% Bloomberg AusBond Composite 0+ Yr (Benchmark) by 1.53% (net) in December, which returned -0.91% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 2.7% (net) over the year, and 1.06% (net) since inception per annum.
The rise in yields was a detractor for long dated fixed rate bonds over the month. However, active Fund 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 Funds 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.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-24.pdfNovember, 2022
The Janus Henderson Tactical Income Fund (Fund) returned 1.03% (net) and 1.06% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by 0.13% (net) in November, which returned by 0.9% on the month. The Fund continues its outperformance, beating the Benchmark over the longer term including by 1.21% (net) over the year, and 0.95% (net) since inception per annum.
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.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-23.pdfOctober, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.19% (net) and -0.15% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by -0.78% (net) in October, which gained by 0.59% 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.
Rates strategies in the Janus Henderson Tactical Income Fund (Fund) are actively managed through exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. Active rates management over the month proved beneficial. This included cutting duration just prior to the Reserve Bank of Australia (RBA) surprising markets with a more moderate 25 basis points (bps) move, adding duration back in the five year part of the curve when yields peaked and closing out this position when yields retreated to their lows. The duration on the Fund finished the month at 0.74 years, which is a year shorter then the previous month.
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.
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.
While central bank tightening, including the RBA is expected to continue, it is worth noting that this doesn't necessarily mean higher yields given markets have priced this in. We continue to remain active across strategies, while exercising a degree of patience as policy pathways unfold.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/JanusHendersonTacticalIncomeFund_MonthlyReport-22.pdfSeptember, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.54% (net) and -0.51% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by 0.07% (net) in September, which fell by -0.61% on the month. However, the Fund continues its outperformance, beating the Benchmark across all periods including by 2.53% (net) over the year, and 1.01% (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.
Rates strategies in the Fund are actively managed through exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. While the broad bond market experienced another large sell off in September, the Fund was cushioned by its heavily reduced duration position, thus significantly preserving capital albeit not immune to the market reaction. Whilst we still have a structural position in duration (at 1.7 years at month end) which we expect will be rewarded over the medium term, we were a lot more guarded compared to June, with duration now at about half of our peak level. The market's over exuberance for further rate rises and the hawkish central bank rhetoric gave us reason for caution. We will be happy to add duration back in at the right point.
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.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-21.pdfAugust, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.47% (net) and -0.43% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by 0.73% (net) in August, which fell by - 1.2% on the month. However, the Fund continues its outperformance, beating the Benchmark across all periods including by 3.38% (net) over the year, and 1.01% (net) since inception per annum.
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.
Rates strategies in the Fund are actively managed through exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. While the broad bond market experienced a large sell off in August, the Fund was cushioned by its heavily reduced duration position, thus significantly preserving capital albeit not immune to the market reaction. The Fund finished July with duration above three years, which was aggressively reduced to 1.5 years by early August just before the latest downturn.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-20.pdfJuly, 2022
The Janus Henderson Tactical Income Fund (Fund) returned 2.01% (net). The Fund outperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by 0.28% (net) in July, which gained by 1.73% on the month. The Fund continues its outperformance, beating the Benchmark across all periods including by 2.56% (net) over the year, and 0.96% (net) since inception per annum.
The team’s ‘fair value’ interest rate process and qualitative judgment 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 focussing 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 benefitted from this part of the yield curve rallying the most.
Rate’s strategies in the Fund are actively managed through exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. It is worth noting, a large contributor to the favourable return delivered over the month was due to the Janus Henderson Tactical Income Fund having had its highest duration position ever, which performed well as yields fell. The duration remained above three-years through till the end of July.
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/JanusHendersonTacticalIncomeFund_MonthlyReport-19.pdfJune, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -1.17% (net) and -1.13% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by -0.46% (net) in June, which fell by -0.71% on the month. However, the Fund continues its outperformance, beating the Benchmark across all periods including by 1.56% (net) over the year, and 0.95% (net) since inception per annum.
Bond markets sold off in mid-June with the magnitude of yield movements resembling something that’s normally witnessed over a one-year time frame, not one week! From when bond yields were at their lows to the peak mid-month, the drawdown of the Australian bond market, 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 standard deviation event. This complexity comes not only from a normalisation of cash rates but also an unwinding of unprecedented, unconventional policy that has artificially pushed bond yields to 100-year lows during the pandemic period.
While markets recovered somewhat towards the end of the month, the Fund was not immune to the sell off. However, comparatively, the Fund has limited the drawdown this financial year returning -3.76% (net of fees) versus the bond market at -10.51% Rates strategies in the Fund are actively managed through exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-18.pdfMay, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.49% (net) and -0.45% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by -0.07% (net) in May, which fell by -0.42% on the month. However, the Fund continues its outperformance, beating the Benchmark across all periods including by 1.79% (net) over the year, and 0.99% (net) since inception per annum.As policy normalisation began, the bond market has suffered large losses. The market, as measured by the Bloomberg AusBond Composite Index, has returned -9.16% this financial year.
The Fund has not been immune to the sell off. However, comparatively, the Fund has limited the drawdown this financial year returning -2.61% versus the bond market at -9.16%. Rates strategies in the Fund are actively managed through exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-17.pdfApril, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -1.21% (net) and -1.18% (gross).The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBondComposite 0+ Yr Index (equally weighted) (Benchmark) by -0.46% (net) in April, which fell by-0.75% on the month. However, the Fund continues its outperformance, beating the Benchmark across all periods including by 1.82% (net) over the year, and 1.00% (net) since inception per annum.
While a negative month is not ideal, for the most part over the last year the Fund had preserved capital owing to its nimble interest rate strategy navigating this rising rate environment. To give context, the Australian bond market (as measured by the Bloomberg AusBond Composite 0+ YrIndex) has fallen 7.47% in the last 12 months as yields have risen since August. This has seen a brutal 10% fall in the index in eight months (annualised at -14.7%) – unheard of for a defensive asset class. In contrast, the Fund has managed to cushion much of this impact with a more modest -1.52% (gross of fees) decline over the year. In the month of April, the Fund was not immune to another drawdown in bond markets. However, once again, heightened level of volatility that lifted bond yields and leaked spreads wider offered up more targeted investment opportunities for the Fund. We continued to take advantage of this by locking in good assets at discounted prices.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-16.pdfMarch, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.93% (net) and -0.89% (gross)in March. The Fund outperformed the Bloomberg AusBond Bank Bill Index and BloombergAusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by 0.96% (net) in March, which fell by -1.89% on the month. The Fund continues its outperformance, beating the benchmark across all periods including by 2.26% (net) over the year, and 1.04% (net) since inception per annum.
For the most part over the past year and indeed quarter, the Fund had preserved capital owing to its nimble interest rate strategy navigating this rising rate environment. In the month of March, whilst the Fund significantly outperformed its Benchmark, it was not immune to the dramatic drawdown in bond markets. In our view, amongst the volatility lie some targeted investment opportunities by taking both interest rate risk and spread risk. The recent lift in bond yields, swap spreads, and credit spreads has created, in our assessment, a unique opportunity to ‘lockin’ investor outcomes at attractive levels
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-15.pdfFebruary, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.10% (net) and -0.07% (gross). The Fund outperformed the Bloomberg AusBond Bank Bill and Bloomberg AusBond Composite 0+ Yr (equally weighted) (Benchmark) by 0.50% (net) in February, which fell by -0.60% on the month. However, the Fund continues its outperformance, beating the Benchmark across all periods including by 1.19% (net) over the year, and 0.97% (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. Against this backdrop, the Fund has been able to preserve capital for investors. For context, over the past six months, the Fund delivered 0.17% (gross) while the Australian bond market as measured by the Bloomberg Composite 0+ Yr Index delivered -5.1%.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-14.pdfJanuary, 2022
The Janus Henderson Tactical Income Fund (Fund) returned -0.14% (net) and -0.10% (gross)over January. The Fund outperformed the Bloomberg AusBond Bank Bill and Bloomberg AusBond Composite 0+ Yr (equally weighted) (Benchmark) by 0.37% (net) in January, which fell by -0.51%. The Fund continues its outperformance, beating the Benchmark across all longer time periods including by 1.57% (net) over the year, and 0.94% (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. While the Fund is a product with an absolute return focus, and capital was largely preserved in the context of the bond market drawdown, it was still not completely immune to the significant repricing that took place. Notwithstanding, the Fund did outperform the Benchmark.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-13.pdfDecember, 2021
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. The Janus Henderson Tactical Income Fund (Fund) returned 0.04% (net) and 0.08% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by -0.01% (net) in December, which gained by 0.05% on the month.
The Fund continues its outperformance, beating the Benchmark across all other periods including by 1.43% (net) over the year, and 0.91% (net) since inception per annum. Rates strategies in the Fund are actively managed through the Fund’s exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. The Fund had a modest level of value add from rate strategies, yield curve positioning, duration and inflation-linked bonds. The long position in the 3-year part of the curve was modestly reduced, while the Fund maintained its broadly neutral duration position on the longer end.
In credit, sector positioning skewed towards the re-opening theme sectors and was relatively resilient as market participants looked through the Omicron variant. However, the December performance was somewhat hampered by some credit protection that was purchased at the onset of Omicron to protect the Fund should credit respond unfavourably to the new strain. In addition, the Fund is currently allocated on an opportunistic basis to higher yielding sectors. The Fund has favoured secured loans, which are a floating rate product, as well as major bank hybrids. These sectors have performed well and contributed positively to performance over the month and year
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-12.pdfNovember, 2021
The Janus Henderson Tactical Income Fund (Fund) returned 0.51% (net) and 0.54% (gross). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) by -0.53% (net) in November, which gained by 1.04% on the month.
The bond market performed well in November, clawing back more than half of the losses which had occurred the month prior. While the Fund benefits from these upswings, it is broadly a shorter duration Fund that aims to preserve capital and offer sustainable returns, which it did so with a healthy solid performance in November. This has seen the Fund deliver 0.15% net over the past three months outperforming the Benchmark which has returned -1.52%. On a longer timeframe, the Fund continues its outperformance, beating the Benchmark across most periods including 1.79% (net) outperformance over the year, and 0.92% (net) since inception per annum
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-11.pdfSeptember, 2021
Against the backdrop of a notable drawdown in bond markets in September, in which the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark) fell by -0.76%, the Janus Henderson Tactical Income Fund (Fund) delivered investors a positive return of 0.22% gross and 0.18% net respectively. Overall, September was a fertile environment for active managers like Janus Henderson, in what was otherwise a low yield and income producing month. Over the cycle, the active strategies within the Fund have proven to preserve capital and deliver stable returns. This is also demonstrated through our longer term results, with the Fund returning 1.27% (net of fees) over the past 12 months, while the Benchmark has fallen -0.74%.
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. 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 protect capital and enhance returns came to fruition in September. This resulted in capital preservation when the bond market returns were firmly negative, outperformance against the Benchmark and the delivery of a positive absolute return
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-10.pdfAugust, 2021
The Janus Henderson Tactical Income Fund delivered a small negative return in August, returning -0.06% (gross) and -0.09% (net). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark), which returned 0.05%. While we reference against the above Benchmark, the Fund is actively managed and holds dynamic underweight and overweight positions compared to the Benchmark. This inevitably comes with periods of underperformance, but over the cycle the Fund has proven to preserve capital and deliver stable superior returns. This is demonstrated through our longer term results, with the Fund returning 1.28% (net of fees) over the last 12 months, while the Benchmark returned 0.56%.
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. Rates strategies in this Fund are actively managed through the Fund’s exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. 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 Reserve Bank of Australia (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. Inflation-linked bonds also offered little in the way of returns in the month, as the gain from the slight dip in bond yields was offset by a slight fall in inflation break-even levels. Sector strategies, particularly the Fund’s allocation to semi-government bonds (semi’s), was the biggest detractor to performance over the month.
The Fund holds an overweight position to semi’s, in particular the NSW government. Valuations have weakened in the Australian states most heavily impacted by the lockdowns and recent new supply has weighed on pricing. We have added to this position during the month, recognising that the states are in their darkest hour but there is a clear exit strategy in place. From a risk perspective, we are comfortable that an overweight to a AA+ rated government entity is prudent, and will result in better investor outcomes going forward. Credit spreads were relatively flat in August, with weakness targeted to certain sectors and maturities. The broader weakness was in longer term credit, notably infrastructure and Real Estate Investment Trusts (REITs). These assets have been disproportionately impacted by the lockdowns particularly the property trusts with exposures to shopping centres and offices. The Fund’s exposure to these assets detracted from performance. The Fund is currently allocated on an opportunistic basis to higher yielding sectors, with offshore high yield making a small positive contribution.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-9.pdfJuly, 2021
The Janus Henderson Tactical Income Fund (Fund) delivered a stable positive return in July, returning 0.18% (gross) and 0.14% (net). The Fund underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark), which returned 0.88% over the month driven by longer duration fall in yields. While we reference against the above Benchmark, this Fund is managed with an absolute return mindset and is designed to have an even return profile over the journey. Over the 2021 calendar year, the Fund has delivered similar results to the much longer duration bond market but without wild swings in monthly returns including the significant drawdown in February witnessed by the bond market. This is also demonstrated through our longer term results, with the Fund returning 1.74% (net over fees) over the last 12 months, while the Benchmark returned 0.31%.
Active interest rate management has been the primary driver of the lower volatility (and drawdown) of the Fund’s monthly results relative to the bond market. Equally, during months like July when long duration assets performed exceptionally well, the Fund lagged this rally despite comfortably outperforming over longer periods. Rates strategies in this Fund are actively managed through the Fund’s exposure to the Janus Henderson Australian Fixed Interest Fund and interest rate derivatives. Performance has been exceptionally strong in this underlying Fund, with returns benefitting from the fall in bond yields and alpha generation through active positioning in interest rate strategies.
The Fund has been moving to a neutral duration position from overweight, taking profit as bond prices rallied. The underlying fund still held a slight yield curve flattening position in the month which contributed strongly to performance given the large market moves. Inflation-linked bonds have also contributed to performance, driven by the fall in yields even as break-evens have settled towards the bottom end of the Reserve Bank of Australia (RBA) target inflation range
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-8.pdfJune, 2021
The Janus Henderson Tactical Income Fund delivered a stable positive return in June, returning 0.14% gross and 0.10% net. The Fund slightly underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark), which returned 0.35% over the month. While we reference against the above Benchmark, this Fund is managed with an absolute return mindset and is designed to have an even return profile over the journey. This was evident over the last 12 months, where the Fund was able to deliver a positive return to investors of 2.22% (net of fees) while the Benchmark fell by -0.38% in this financial year. 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 bond portfolios even as the bond market (as measured by the Bloomberg AusBond Composite 0+ Yr Index) return was negative.
The economic recovery continues to be robust with data surprising to the upside domestically (despite current State lockdowns) and in the US, Europe and Asia. Inflation expectations were curbed over the month as the inflation narrative by all central banks continues to be one of transitory cyclical inflation. That said, some of the supply chain bottle necks and lifting in commodity prices may mean that inflation in the near term tends to stick longer than policy makers expected. It appears that the Fed may be taking note of this as the Fed dot points forecasted higher rates and commented that it will start discussing the appropriateness of tapering quantitative easing (QE) soon.
While we take heed of economic data and rhetoric by central banks, this needs to be viewed in terms of what is priced into markets. Bond yields have been restrained even with all that talk, and the 10 Year bond yield finished the month 38bps lower than where it was at the end of February
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-7.pdfMay, 2021
The Janus Henderson Tactical Income Fund delivered a stable positive return in May, returning 0.11% gross and 0.08% net. The Fund slightly underperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark), which returned 0.13% over the month. Over the 12 months, the Fund has significantly outperformed its Benchmark by 3.40% net of fees, with the Fund delivering 2.84% to investors compared to the Benchmark which fell by -0.56%.
While the Fund is managed with an absolute return mindset, active interest rate management plays a significant role in its performance. Our base case on rates is that central banks and governments are looking to grow the economy, such that very low levels of unemployment are reached (effectively full employment with only friction remaining) which if left unbridled for long enough will tighten the labour market sufficiently to generate inflation. With this in mind, we think the markets have overpriced the likelihood of the RBA commencing a tightening cycle as markets look for a 2023 rate hike, balanced against the potential for bond yields to rise further as inflation expectations get further priced into markets. At current levels, we view nominal government bond duration reflecting close to fair value and have moved the Fund to a broadly neutral stance. In the last few months, we have pulled back the Fund’s duration, taking profit after holding our highest overweight duration position at the turning point in yields. Our current duration position in the Fund sits appropriately with this fair value assessment of bonds and is designed to mitigate interest rate risk breaking out in either direction.
We now await the next overshoot before we will apply a more meaningful position. The Fund generated a positive return in the month but performed slightly below the Benchmark which has a greater sensitivity to interest rate moves, in this case benefitting from the fall in longer dated bond yields.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-6.pdfApril, 2021
The Janus Henderson Tactical Income Fund (Fund) kept pace with market returns in April while also protecting capital in prior months as yields rose. The Fund delivered a good absolute return, returning 0.29% gross and 0.24% net. The Fund slightly outperformed the Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index (equally weighted) (Benchmark), which returned 0.28% over the month. Over the last 12 months, the Fund has significantly outperformed its Benchmark by 4.18% net of fees, with the Fund delivering 3.63% to investors compared to the Benchmark which fell by -0.55%.
While the Fund is managed with an absolute return mindset, active interest rate management plays a significant role in its performance. The rates market has been digesting and pricing in a lot of good news over the last few months with bond yields reaching their peak at the end of February. Since then the markets have pulled back, with yields lowering and levels approaching our fair value models. The Fund held its highest overweight duration position at the turning point and since then we have trimmed our long position, taking profit, and taking the Fund’s duration to where we think is neutral. This has all been done while keeping up with market performance. We now await the next overshoot before we will apply a more meaningful position.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-5.pdfMarch, 2021
The Janus Henderson Tactical Income Fund (Fund) again preserved capital and delivered a positive return in March, returning 0.29% (gross) and 0.26% (net). The Fund underperformed the Bloomberg AusBond Composite 0+ Yr Index and AusBond Bank Bill Index (equally weighted) (Benchmark) this month but continues to outperform the Benchmark returns across all longer periods. The Fund outperformed the Benchmark net of fees by 0.96% over the quarter, significantly outperformed by 5.46% over the year, and 0.93% since inception. 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. Meanwhile, exposures to spread sectors including investment grade credit detracted from performance
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-4.pdfFebruary, 2021
The Janus Henderson Tactical Income Fund (Fund) again preserved capital, avoiding much of the damage in bond markets. That said, the Fund delivered a negative return of -0.89% (gross) and -0.92% (net) in February. The Fund meaningfully outperformed the Bloomberg AusBond Composite 0+ Yr Index and AusBond Bank Bill Index (equally weighted) (Benchmark) and continues to outperform the Benchmark returns across all longer periods. The Fund has outperformed the Benchmark by 88bps (net) in February, 146bps (net) over the quarter, 435bps (net) over the year, and 96bps (net) since inception.
Whilst a negative return is never ideal, February’s result needs to be assessed in the context of the largest monthly drawdown in the bond market since 1983 and also the Fund having delivered positive monthly returns since November when the bond market, as measured by the Bloomberg AusBond Composite 0+ Yr Index, has been negative in November (-0.11%), December (-0.27%), January (-0.42%) and February (-3.58%) with a cumulative -4.35% over the past four months. Meanwhile, over the same four-month period, the Fund has largely preserved investors’ capital delivering 0.10% (gross) and -0.05% net of fees.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-3.pdfJanuary, 2021
The Janus Henderson Tactical Income Fund (Fund) again preserved capital and delivered a positive return in January, returning 0.07% (gross) and 0.02% (net). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index and AusBond Bank Bill Index (equally weighted) (Benchmark) this month and continues to outperform the Benchmark returns across all longer periods. The Fund outperformed the Benchmark net of fees by 23bps in January, 127bps over the quarter, 305bps over the year, and 88bps 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), with all contributing positively to overall outperformance versus the Benchmark. 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. The duration ended the month at 1.92 years, down from 2.16 years, which helped preserve capital relative to the Benchmark. 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 and global high yield 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 recessionproof, sleep-well-at-night 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.
An above average allocation to opportunistic higher yielding credit also proved to be a successful strategy with hybrids, loans and high yield all doing well. Finally, the Conservative Fixed Interest Fund, the Diversified Credit Fund and the Cash Fund that the Tactical Income Fund invests in outperformed their respective benchmarks, while the Australian Fixed Interest Fund slightly underperformed.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-2.pdfDecember, 2020
The Janus Henderson Tactical Income Fund (Fund) delivered a strong positive return in December whilst preserving capital, returning 0.26% (gross) and 0.22% (net). The Fund significantly outperformed the Bloomberg AusBond Composite 0+ Yr Index and AusBond Bank Bill Index (equally weighted) (Benchmark) this month and continues to outperform the Benchmark returns across all longer periods. The Fund outperformed the Benchmark net of fees by 35bps in December, 130bps over the quarter, 207bps over the year, and 87bps annualised since inception. The calendar year of 2020 also saw the Fund deliver very strong performance outcomes for investors against its objectives and Benchmark.
The Fund seeks to actively asset allocate across rates strategies (including long duration fixed interest and floating rate) and sector strategies, with all contributing positively to overall performance. Notwithstanding the steepening of the yield curve in December, active intra-month management in rates (with duration ending the month at 2.16 years, up from 2.02 years) assisted performance versus the Benchmark. As Europe and the US began distributing the vaccine over the month and markets looked through the current COVID-19 wave, yields remained in a higher range creating opportunities to actively manage duration.
Semi-government bond performance was down in the month. The rise in rates on the long end, together with a ratings downgrade on NSW and Vic from S&P, offset the coupon income. Last month, the Fund actively trimmed its exposure to semi’s taking profit given the downgrade potential as well as supply uncertainty from the Victorian and NSW budget announcements and used the proceed
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport-1.pdfNovember, 2020
The Janus Henderson Tactical Income Fund (Fund) delivered a positive return in November whilst preserving capital, returning 0.67% (gross) and 0.64% (net). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index and AusBond Bank Bill Index (equally weighted) (Benchmark) this month and continues to outperform the Benchmark returns across all longer periods. The Fund outperformed the Benchmark net of fees by 69bps in November, by 59bps over the quarter, 246bps over the year, and 84bps since inception.
The Fund seeks to actively asset allocate across rates strategies (including long duration fixed interest and floating rate) and sector strategies, with all contributing positively to overall performance. Active intra-month management in rates (with duration ending the month at 2.03 years, up from 1.57 years) contributed strongly to performance. The Fund extended its duration following the announcement of vaccine trial results and subsequent steepening of the long end of the curve, and rode the rates rally into month end. The Fund took advantage of the steeper curve to add to its flattening bias which paid off as a cash rate anchored at 0.10%, yield curve control and active RBA buying of bonds each week supressed yields again following the euphoria of the vaccine promise.
Semi-government bond performance was dragged down by the increase in rates on the long end which offset the gains from spread tightening and the coupon income, resulting in a broadly flat performance number. Early in the month, the Fund actively trimmed its exposure to semi’s given the supply uncertainty from the Victorian and NSW budget announcements and used the proceeds to buy supra national bonds which performed well and improved the outcome for the Fund.
Inflation-linked bonds outperformed in November. The positive outlook by markets from the vaccine trials lifted inflation expectations and buoyed pricing of these securities. Credit spreads tightened across fixed interest sectors in November. Sector allocation in credit was a large contributor to performance in the month.
The Fund maintained a high allocation to recession-proof industries whilst keeping an eye on cyclical issuers (major airports, toll roads, large diversified lowly geared property trusts) which will perform well in a post-vaccine world. An above average allocation to opportunistic higher yielding credit also proved to be a successful strategy with hybrids, loans and high yield all performing well.
Finally, all of the underlying Janus Henderson Funds that the Tactical Income Fund invests in including the Australian Fixed Interest, Conservative Fixed Interest, Diversified Credit and Cash Funds outperformed their respective benchmarks.
File: https://commentary.quantreports.net/wp-content/uploads/2020/11/JanusHendersonTacticalIncomeFund_MonthlyReport.pdfOctober, 2020
The Janus Henderson Tactical Income Fund (Fund) delivered a positive return in October whilst preserving capital, returning 0.45% (gross) and 0.40% (net). The Fund outperformed the Bloomberg AusBond Composite 0+ Yr Index and AusBond Bank Bill Index (equally weighted)(Benchmark) by 25 basis points (bps) in October, 47bps over the quarter, 155bps over the year, and 79bps since inception.
The Fund seeks to actively asset allocate across rates strategies (including long duration fixed interest and floating rate) and sector strategies, with all contributing to overall performance. Rates (including duration ending the month at 1.58 years) 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.
Allocations to spread sectors, including exposure to semi-government bonds, was a positive for the Fund. An overweight to semi-government bonds added value as they outperformed treasuries, even with the potential for a ratings downgrade to the state of Victoria. Communication from the RBA indicating they want to keep borrowing costs low for the state governments supported pricing, resulting in a positive contribution to the Fund’s return in the month. Returns from Inflation-linked bonds were broadly flat October. However, we maintain a long-term view on these securities, as they offer a cheap hedge against rising inflation down the track beyond the current recession.
Deviating from offshore trends, the Australian credit market performed strongly in October as credit spreads tightened. The Fund maintains a high allocation to corporate senior debt (45% of the Fund) which benefitted from these price moves. As discussed above, senior bank notes were the real winner over the month. An above average allocation to opportunistic higher yielding credit also proved to be a successful strategy with hybrids, loans and high yield all performing well.
Finally, all of the underlying Janus Henderson Funds that the Tactical Income Fund invests in including the Australian Fixed Interest, Conservative Fixed Interest, Diversified Credit and Cash Funds outperformed their respective benchmarks.
ticker: IOF0145AU
commentary_block: Array
factsheet_url:
https://www.janushenderson.com/en-au/investor/product/tactical-income-fund/
Janus Henderson Tactical Income Fund – Monthly Report
release_schedule: Monthly
fund_features:
Janus Henderson has set Tactical Income seeks to achieve a total return after fees that exceeds the total return of the Benchmark (Bloomberg AusBond Bank Bill Index and Bloomberg AusBond Composite 0+ Yr Index equally weighted), by investing in a diversified portfolio of predominantly Australian income producing assets.
- Flexible asset allocation.
- Indicative asset allocation range : Cash (0-100%), Conservative Fixed Interest (0-100%), Australian Fixed Interest (0-100%), High Yield Securities (0-20%).
- Derivatives may be used solely for investment and risk management purposes and cannot be used to gear the Fund.
- The Fund is considered a low-medium investment 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