Janus Henderson Hrzn Jpn Smr Coms A2 USD |
Morningstar's Take
|27/11/2023by Ronald van Genderen
| Janus Henderson Horizon Japan Smaller Companies benefits from a lead manager that we hold in high regard. He stands out in terms of experience and tenure on this strategy, but most importantly, his capabilities have proved to provide this strategy with an edge. Therefore, we upgrade the People Pillar rating to Above Average from Average. The Process Pillar rating is maintained at Average. This strategy has been in the strong hands of Yunyoung Lee since his arrival at Janus Henderson in May 2005. He is one of the longest-tenured managers in the Japan small/mid-cap equity Morningstar Category and boasts almost three decades of experience, of which the largest part has been geared toward this space. He is an asset to this strategy, and we hold him in high regard. The well-experienced Yusuke Suzuki supports Lee as a dedicated analyst since July 2016. This keeps the team size very compact, and it remains clear that Lee is the sole decision-maker. Therefore, key-person risk and lightly staffed support are issues that still lurk. Lee applies a distinctive approach that is centered around identifying catalysts that can unlock perceived undervaluation. His preferred tool to unearth these possible catalysts are company meetings that are front and center to its process. Indeed, these meetings play an important role in idea generation and in fundamental research, while quarterly meetings also inform the manager on his positioning once a stock has entered the portfolio. While such an approach seems hard to repeat successfully, Lee’s strong and consistent track record demonstrates his skill in gaining relevant insights from these meetings and gives him an edge over his peers. The approach is style-agnostic, and while Lee tends to invest across the entire style spectrum, his portfolio will generally land in the blend column of the Morningstar Style Box in line with the Morningstar Japan Small Cap Index category benchmark. However, the focus on perceived undervaluation of stocks can move the portfolio also to a value style, which was the case between 2017 and 2020. This style exposure sets the strategy apart from its peers, who have a more growth focus on average. Portfolio construction is guided by bottom-up stock selection, and sector allocations are a dynamic outcome of where Lee sees opportunities. This is best exemplified by Lee’s positioning in the healthcare sector. The portfolio had no exposures here in late 2019, but over the following years, Lee found an increasing number of stocks that fulfilled his criteria, and with a 14.30% allocation, it represents a significant overweighting as of October 2023. Meanwhile, the consumer defensive sector is another distinctive overweighting versus the category average and benchmark, while the consumer cyclical sector represents a large underweighting. The track record of this strategy has been formidable under Lee’s watch. The strategy has significantly outperformed the category average and benchmark, also on a risk-adjusted basis, as its volatility was only slightly elevated. The consistency in which Lee managed to stay ahead of these two comparators is remarkable, as evidenced by a five-year rolling alpha that has been positive over his entire tenure. |
The capabilities of a seasoned and long-tenured manager give this approach an edge.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | Above Average |
| Parent | Average |
| Process | Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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