Best In Class  

Best in Class: Janus Henderson UK Absolute Return

Best in Class: Janus Henderson UK Absolute Return

Last week, the day after Prime Minister Theresa May's deal was rejected in the 'worst government defeat in 95 years', I was asked by an eight-year-old, “What is this Brexit thing?” 

By my third attempt - when I'd realised "trade negotiations" and "free movement of labour" were being met with a glazed look and I'd instead started talking about Germany selling BMWs in the UK; how it was never going to be easy because the EU does not want us and possibly others to leave; and it being difficult for shops and businesses to plan for their future if they don't know how easy it will be to sell their products to different countries – there was a glimmer of understanding.

My closing statement of “it's all a bit of a mess really”, was met with a more vigorous nod.

Explaining Brexit is hard. Negotiating a deal even tougher.

What is in store for our economy and stock market over the coming months is anyone's guess. And that makes investing hard too.

So I find myself coming back to an old favourite today: a fund that aims to achieve positive returns come what may (no pun intended).

Janus Henderson UK Absolute Return is managed by Ben Wallace and Luke Newman.

It aims, but does not guarantee, to deliver positive returns in all market conditions, with the managers looking to identify stocks that will either exceed or fall short of analysts’ expectations, and construct a portfolio of core long positions and a more tactical trading book of short positions.

In terms of shorting, the managers look for stocks that have earnings growth already priced in for core shorts, or in the case of tactical shorts, look for stocks that could be overbought or overpriced, are changing management, or are being adversely influenced by macroeconomic factors.

Mr Wallace and Mr Newman have a long history of working together. A macroeconomic overview informs stock selection and they will both put forward stock ideas, with those not achieving consensus being marked for further review.

Due to the fast moving nature of an absolute return fund, it is not always possible to have a consensus on buy and sell decisions and take advantage of market timings.

But the fund managers have implicit trust in each other to make those decisions autonomously.

The fund was launched in 2010, but the strategy and the team have a much longer track record running an identical mandate and the returns have been remarkably consistent.

In 2011 it was closed to new investors for a period as the assets in the strategy had grown rapidly. But it was reopened in June 2013 and, in October 2016, the remit was changed to give the managers more options: the amount it could hold in international stocks was doubled from 20 per cent to 40 per cent.