The dollar I-share class of this $282.3m (£183.2m) Dublin-domiciled fund was launched on December 31 1999 and has been managed by Jonathan Coleman and Maneesh Modi since May 2013.
It invests in US smaller companies that typically have a strong competitive position and improving earnings, and looks to invest at least half of its value in small caps whose market values are within the range of the Russell 2000 Growth index. However, it can also invest up to 25 per cent of its value in non-US businesses.
Mr Coleman explains that the Janus US Venture fund begins with a total investable universe of small-cap stocks with market capitalisations between $100m and $6bn, which encompasses both the Russell 2000 Growth index and “other appropriate” small-cap indices. “Companies are assessed from a qualitative and quantitative standpoint in order to narrow the list of stocks that warrant detailed coverage by the Janus research team – which includes a team of dedicated small-cap analysts – to approximately 500 small-cap growth stocks,” he reveals.
The quantitative criteria includes high margins, improving return on invested capital, identifiable revenue growth, earnings consistency, insider ownership and high, free cashflow yield. On the qualitative side, the team looks for compelling business models, competitive advantages, attractive industries and skilled management teams. The analyst team then uses global screens, field contacts and company meetings to identify the most promising ideas within each sector. Mr Coleman notes: “We seek to identify small-cap companies with differentiated business models and sustainable competitive advantages. The stocks in our portfolio are not dependent on global growth, but are more exposed to US growth. Considering the low growth expectations outside of the US, we see this as a positive with slightly better growth expectations for the US.
“Many of the stocks within the fund have stable and resilient business models and revenue streams, or are early enough in their growth cycle they are able to take market share. We believe these types of companies are poised to fare better when growth expectations are slower.”
The fund’s key investor information document notes the risk-reward level sits towards the riskier end of the spectrum at six out of seven, while the ongoing charges for the dollar I-accumulation share class are 1.73 per cent.
Since launch the fund has performed consistently well, topping the Investment Association North American Smaller Companies sector for the five years to February 26 2015 with a return of 154.21 per cent, compared with the sector average return of 103.66 per cent and the Russell 2000 Growth index rising 124.9 per cent. It has also outperformed both the sector and the index across one- and three-year time periods, and remains the best-performing fund in the peer group with returns of 24.8 per cent and 78.22 per cent respectively, data from FE Analytics shows.
Mr Coleman notes the main contributors to performance on both a one- and three-year basis have been the energy and IT sectors, with IT its largest sector weighting at 30.05 per cent.
Meanwhile, the largest detractors for performance in the past 12 months and three years have been the industrials and consumer discretionary sectors, which account for 18.97 per cent and 12.66 per cent of the portfolio respectively.
Looking ahead the manager remains positive on the industrials sector. He explains: “We believe many cyclical companies have the opportunity to win market share, in particular where companies can bring sophistication to end markets traditionally served by small family-owned businesses. We tend to avoid the more cyclical, economically sensitive names. Instead, we focus on recurring revenue streams, manufacturers with secular growth and companies that can gain market share and consolidate a fragmented industry.”
Other trends in 2015 include service firms that provide solutions to the financials industry and innovation in healthcare. As a result the team has raised its exposure to the healthcare sector, “with an emphasis on game-changing devices and drugs and companies with proprietary technologies with growing addressable markets”, he adds.
Nyree Stewart is features editor at Investment Adviser
EXPERT VIEW
Ben Willis, investment manager and head of research, Whitechurch Securities
Janus is not a familiar name to UK investors but it is an established investment house in the US. This is an offshore fund looking for growth in US small-cap equities. The US market has provided excellent returns recently and so, in turn, has this fund. The current managers have been running it for just less than two years and so far are outperforming the benchmark. It will be interesting to see how well they manage the fund during a bear market. Due to its investment focus, the portfolio is likely to have limited appeal for the average UK investor.
