Experienced European equity manager John Bennett uses sector analysis in his process, focusing on under-researched opportunities. The resulting high-conviction portfolio of 40-50 mega and large-cap stocks, which is Janus Henderson European Selected Opportunities, has neither a growth nor a value bias.
Our opinion
We like John's pragmatic approach as manager of the Janus Henderson European Selected Opportunities fund, and the fact that he takes the macroeconomic environment and sector trends into consideration, as well as looking at individual companies. This fund is a core European holding.
Company description
Janus Henderson is the product of a merger between Henderson Group and Janus Capital Group. Trading on the New York and Australian stock exchanges, the group was formed in May 2017 to form a greater collective and benefit from expanded product ranges and a larger pool of talent employed.
Fund manager
John Bennett became part of Henderson (now Janus Henderson) in 2011 after previous employer Gartmore was acquired by the company. Prior to that, he was a fund manager at GAM for 17 years. He also manages Elite Rated Janus Henderson European Focus. John is director of European equities at Janus Henderson and has been a Member of the Chartered Institute of Bankers in Scotland since 1987. John is one of the most experienced European fund managers in the industry with over 30 years’ experience.
Our job is to put bread on the table. What is the bread? Market beating returns.
John BennettFund manager
Investment process
John and his team seek to add value by identifying and selecting sector themes and combining them with individual company analysis. They begin by considering market and industry dynamics on a global basis. The team conducts many company meetings which gives it an overall insight into the marketplace. The insights it gains lead it to different ‘sector themes’, which allows it to narrow the investment universe down to the areas with the greatest potential. Research is concentrated on under-researched companies where the team can add the most value.
Janus Henderson European Selected Opportunities will typically have a bias towards contrarian investing, as the team like to identify a catalyst and ‘investing in change’ is a crucial part of the process. With this fund, John focuses on companies worth more than €1bn, which rules out smaller companies and many medium-sized ones, leaving him a bias towards large and mega-cap stocks.
John has historically been wary of the banking and telecom sectors, and this view still holds true due to the increase in disruption in those industries.
The fund previously held between 50-65 stocks; however, John and the team have increased the level of concentration in both this and the Elite Rated Janus Henderson European Focus fund to improve the active characteristics of the portfolio.
ESG
ESG - Limited
John’s approach to ESG is informal and on a case-by-case basis. He looks at the rate of change of companies, rather than how they look at any one time and wants to ensure that he captures the solutions to environmental and social issues, rather than excluding those firms that don’t meet the accepted definition of responsible. As such, the portfolio may include firms in challenged industries, but that are leaders in reducing their carbon footprints and other environmental impacts. John sums this up as “ESG 2.0”, where he believes the industry will move on from simply excluding laggards, into allocating towards those improving their issues. The fund does report its carbon footprint, the climate goals of its holdings and the overall ESG risk based on external data. Internally, there is regular engagement from the team at Janus Henderson on all identified E, S & G issues, with the boards of the portfolio of companies in collaboration with the wider equities team. This includes voting policies which are made in close consultation with the fund manager.
Risk
Given the size of the fund, it is still relatively concentrated with approximately 40-50 stocks. Risk is controlled by limiting holdings in an individual stock to 10%, although in the past very few have gone past the 5% barrier. However, this is likely to be more common in the future thanks to the increased concentration in holdings, a move which is also likely to see risk increase slightly. In addition, the team pays close attention to valuation and tries to invest in stocks with a ‘margin of safety’. Investors should also be aware of the currency risk.
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