Fund Performance review
The fund returned 9.8% in the second quarter, outperforming its benchmark index, MSCI ACWI, which returned 7.0%.
From a sector perspective, we had strong positive contributions from both the financials and information technology sectors. Our consumer staples exposure detracted from performance.
Netflix was the fund's strongest contributor in the second quarter. The company is becoming increasingly dominant in the video streaming market globally. Content is king in video streaming, with Netflix competing against the likes of HULU and Amazon Prime Video, and Netflix has shown a strong track record in developing compelling original content for subscribers. This emphasis on original content is becoming stronger. The Chairman and CEO, Reed Hastings, co-founded the company in 1997, steering the company away from DVD mail rental and towards becoming a leader in video streaming. It is this kind of proven leadership that the team likes to invest alongside.
Auto Trader was another significant positive contributor over the period. Auto Trader dominates the UK online autos marketplace, generating hundreds of millions of advert views per month with both retailers and individuals advertising vehicles on its platform. It also provides access to ancillary services like finance, vehicle history, reviews and insurance while also offering data-driven products to sellers which increases its ability to grow revenue. We think the company is well-positioned to benefit from the continued trend of advertising spend moving from offline to online, a secular trend that we believe will sustain for the long term.
Our exposure to payments companies was a positive with MasterCard, Visa and American Express all contributing positively to performance. While cash still dominates when it comes to global payments, the increasing adoption of card-based payments looks set to continue. Key factors supporting increased use of cards include the growth of online retailing, innovations such as mobile point of sale technology, and the growing use of prepaid cards. We believe that the increasing use of paperless payments over time and a continuing shift away from cash as a medium of exchange offers long-term investors attractive growth opportunities.
The fund’s most significant detractor was Tiger Brands, a South African packaged foods company. Earlier in the year, Tiger was forced to recall some products due to a suspected outbreak of listeria at certain company owned facilities. However, as long-term investors it is our belief that Tiger has a high quality management team, franchise and financials. Moreover, we believe that the response to this issue has been appropriately managed and that Tiger should recover over time. The company enjoys very strong market positions in its native South Africa, while it is also selectively pursuing expansion across sub-Saharan Africa, looking to benefit from the favourable demographics that exist in the region. Therefore, we have retained our holding in the stock.
|Discrete year performance
||Janus Henderson Global Equity Fund (%)
||MSCI AC World Index (%)
|1 year to 30/06/2018
|1 year to 30/06/2017
|1 year to 30/06/2016
|1 year to 30/06/2015
|1 year to 30/06/2014
* Source: Morningstar, at 30 June 2018, nav-nav, net income reinvested, net of fees, Class I Acc shares, in Sterling. Past performance is not a guide to future performance. Prices can go up and down and you may not get back the amount originally invested. NAV = net asset value.
Fund activity review
Activity included the purchase of a position in Novo Nordisk, the Danish biotech and pharmaceutical company. Novo is a global leader in the diabetes care market, granting the company important pricing power in an industry under pressure on drug prices and subject to cheaper, alternative competition. Dietary and lifestyle factors have seen the proportion of the global population with diabetes increase over the years, thereby increasing the need for treatment and care. Despite this, of the world’s approximately 415 million diabetes sufferers, less than 50% are treated. Novo Nordisk is well-positioned to meet this demand, especially as it moves towards providing insulin treatments on a weekly (rather than daily) basis, which is much less stressful for diabetes patients. We sold positions in Colgate-Palmolive and Drägerwerk.
Fund manager's outlook
Our strategy is to avoid making major macroeconomic calls, and to instead focus bottom-up on finding companies with underappreciated growth and high barriers to entry at attractive valuations. Through purchasing undervalued securities that are exposed to strong secular tailwinds of growth, we aim to generate attractive returns over the longer term.
Janus Henderson Investors
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Issued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services. © 2018, Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC.
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