by Will Ashworth | July 25, 2014 8:44 am
Janus Funds — which just reported second-quarter earnings this week — is one of the biggest mutual fund families in the U.S. with $174 billion in assets under management at the end of 2013 … and you don’t acquire that much of a following without offering some of the top mutual funds on the market.
Offering investors a lineup of 36 mutual funds, Janus Funds provides something for every type of investor. Although Janus Funds has been experiencing net outflows in recent quarters, a significant number of its mutual funds still garner four- or five-star ratings from Morningstar.
At the end of the day, it’s all about performance.
Janus Funds has several share classes available. Before buying, though it’s important to confirm the fee structure for your particular share class. I’ll be talking about their Class T shares, which can be bought through discount brokers like Fidelity, etc. The Class T shares are no-load funds, so you won’t pay any sales charges — just the annual management expense ratio. The one exception is a short-term trading fee that could be assessed by your discount broker should you sell within 60 days or some other period of time. The initial investment for each Class T fund is $2,500, but you probably can open an account with a $250 regular monthly purchase.
So, what are the top mutual funds to own that are managed by Janus Funds? Here are my favorite five:
Janus Funds has a total of five fixed-income mutual funds to choose from, with the Janus High-Yield Fund (JAHYX) providing the best combination of good long-term performance and reasonable fees. With a 15% annual total return over the past five years, along with a reasonable annual expense ratio of 0.87% (or $87 annually for every $10,000 invested), JAHYX focuses on companies that generate significant free cash flow and are committed to improving their capital structures.
A majority of the 217 bonds held are corporate bonds, with 70% of them garnering either a B or BB rating, making them speculative in nature but not junk. Most of the bonds held are from North American companies, with 60% represented by four industries — energy, communications, consumer cyclical and consumer non-cyclical.
JAHYX has been managed by Gibson Smith, Janus Funds’ chief investment officer, since December 2003. It’s rated four starts by Morningstar, and has had just one year of negative returns in the past decade. This is among the top mutual funds to own if you are interested in a bond component actively managed for your portfolio.
The name Janus Venture Fund (JAVTX) implies it’s some kind of tech mutual fund. In reality, JAVTX is really a small-cap growth fund with $2.4 billion in total net assets invested in 107 stocks including Wolverine World Wide (WWW) and Carter’s (CRI) — two of my favorite stocks, but hardly what you’d call technology stocks.
If you believe in a concentrated portfolio with the top 10 holdings representing a lion’s share of the net assets, then you might not like the fact its top 10 holdings are just 20% of the overall portfolio. However, when you consider that a small-cap fund like the Vanguard Small-Cap Index Fund (NAESX) has a weighting of just 2.5% for its top 10 holdings out of a total of 1,442, you realize that it’s plenty concentrated.
Still, Janus Funds’ JAVTX gets a five-star rating from Morningstar — the most stars possible, given out only to top mutual funds. Given the Venture Fund’s five-year annual total return of 28.5% — 480 basis points higher that the small-cap growth category — it’s not hard to imagine why.
As Janus Funds co-manager Jonathan Coleman likes to say, “We ask three questions about every stock we consider: 1. how do they create value?, 2. what is out differentiated view?, and, 3. what is the business worth under a range of scenarios?”
That’s a pretty simple and straightforward approach that clearly generates results.
Janus Funds bills the Janus Perkins Global Value Fund (JGVAX) as pursuing “defensive global value.” The trio of managers that handle this fund have a mandate that allows them to go anywhere across the entire market-cap spectrum. In 2013, Lipper awarded the Class D version of this fund as the best global multicap value fund over a five-year period. It was the only mutual fund from the Janus Funds family to win an award.
Interestingly, Morningstar only gives the Class T version three stars compared to four for the Class D. That likely has to do with the additional 5 basis points on the Class T’s management expense ratio.
Unlike the Janus Venture Fund, JGVAX doesn’t have billions in net assets to invest. Nonetheless, it impressively managed to deliver a total return of 1.7% in 2011 — almost 11 percentage points higher than the MSCI EAFE index. This stat alone tells me the managers care more about preserving capital than hitting it out of the park. Though you can also see it in holdings such as Microsoft (MSFT) and Johnson & Johnson (JNJ).
While the fund’s long-term track record isn’t much better than the benchmark index, it has managed to deliver positive results in nine of the last 10 years, which is one better than the index.
With about 41% of the portfolio invested in North America, this offering from Janus Funds provide investors with a good global large-cap mutual fund. Add a global small-cap to the proceedings, and you’ve got most of the bases covered.
At 1.03%, the Perkins Global Value Fund’s management expense ratio is considered below average for the category.
Also managed by Jonathan Coleman, the Janus Triton Fund (JATTX) seeks to invest in smaller growth companies that can grow into larger, midcap businesses.
JATTX turns over the entire portfolio about once every two-and-a-half years, so its small- to midcap mandate means Coleman is holding stocks much longer than he would with a small-cap mutual fund like JAVTX above.
Although Janus Funds’ offerings have suffered serious setbacks in recent years, the Triton is a shining beacon within the mutual fund industry. Over the past five years, the Triton fund has achieved an annual total return of 27.7%, or 79 basis points less than the Venture fund. The big difference between the two mutual funds is that the Triton is 65% invested in midcap stocks, with the remainder in small- and microcap stocks, while the Venture is the opposite way around. Long-term, I see mid-cap stocks outperforming small-cap stocks.
JATTX’s management expense ratio of 0.95% is considerably lower than the Morningstar category average of 1.45%.
In its marketing material, Janus Funds describes Janus Diversified Alternatives Fund (JDATX) as providing an “absolute return with true diversification.” What this means is that the fund has a low correlation to stocks and bonds.
Managed by three professionals who all joined the firm in 2012, JDATX seeks to zig when stocks and bonds zag, reducing the overall portfolio volatility.
At least, that’s the plan.
Without getting to deep into the nitty gritty of what this fund does, suffice it to say the managers use a proprietary multifactor process to invest across various types of assets including equities, fixed income, commodities and currencies. Among its top equities are Canadian Pacific Railway (CP) and Comcast (CMCSA). While it did little in terms of performance in its first year as a mutual fund, should equity markets take a dip and commodities recover, this could be a good way to eke out returns if the bull market comes to an abrupt end. At least Janus Funds is hoping that’s the case.
You won’t find any kind of rating on this mutual fund. Janus Funds opened JDATX in December 2012; a little more than 12 months later, its net assets total just $85 million.
Also, don’t be scared by Diversified Alternatives’ 1.52% management expense ratio — that’s considered below average for the alternative investment category.
As of this writing, Will Ashworth did not hold a position in any of the aforementioned securities.
This piece was updated from Jan. 27.
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