Key takeaways:
- Macro drivers tied to geopolitical realignment, demographics, and the return of the cost of capital continue to be high on the agenda, with active rather than passive investing seen as better suited to taking advantage.
- There is strong interest in fixed income, as well as in innovation themes like technology and biotech. Exchange traded funds (ETFs) are increasingly a vehicle of choice. Allocation views remain positive on the US and are becoming more constructive on Western Europe, developed Asia, and certain areas of emerging markets.
- Demand continues for customisation of service and product to best suit individual needs. Clients are favouring Solutions offerings that blend expertise to start to bring the large amounts of cash on the sidelines back into play.
In this video Ali Dibadj explores the topics that are currently front of mind for clients and setting the direction of our industry. High on the agenda are the three macro drivers that we’ve talked and written about previously Navigating change: Three drivers for long-term investment positioning.
Geopolitical realignment, demographic shifts, and the return of the cost of capital are combining to have a meaningful impact on the investment landscape. Higher borrowing costs in particular are separating the winners and losers, and require a proactive approach to security selection as discussed in What the higher cost of capital means for investors. Harnessing innovation themes, such as biotech, AI, and technology more widely, also suits research-driven investing.
In other areas, investors are beginning to add more risk to portfolios and considering a balanced equity and fixed income approach, emerging markets are again on the radar, and the services of portfolio construction & strategy teams are in growing demand as clients look for optimal positioning.
As Ali notes, there is optimism coming back into the industry and it is an exciting time for Janus Henderson’s 340+ active investing experts and 500+ client service specialists. Having been investing together with clients – and their clients – for 90 years, our commitment to delivering a brighter future for all is as strong as ever.
Transcript of the Video
Hi, I’m Ali Dibadj, the CEO of Janus Henderson. We thought it might be helpful to you, our valued clients, to share from time to time the industry themes I’m hearing most in conversations with asset allocators, family offices and clients, colleagues, investors and others globally.
I’m truly fortunate to be able to travel around the world and meet many of you and them. In fact, we have hundreds of clients and about 60 million actual individual people who have directly or indirectly entrusted their brighter futures to Janus Henderson. For this, we are grateful and humbled.
Now, the three macro drivers that we’ve talked and written about previously continue to be high on people’s agendas. These are:
1) Geopolitical realignment – Tensions, elections and political changes leading to decentralized supply chains, protectionism and power shifts are clearly influencing money flow and investor decisions.
2) Demographic shifts – People are changing how they live, work and the products or services they consume and certain sectors and companies will benefit. And our stakeholders are aware of that, both from an investment perspective and for their own organizations.
3) Cost of capital – Higher interest rates impact all companies, but the weaker ones are hit particularly hard. This means the tide will not lift all boats and a greater dispersion between the winners and the losers, the haves and the have nots, and active management like what Janus Henderson does, will be key in identifying these and positioning accordingly, long or short.
In that macro context we just went through, we are hearing several common themes in our conversations with clients.
One which we just touched on is the return of active asset management. Clients understand the importance of being able to select those credit stocks and other securities that can best take advantage of the macro drivers. Clients favoring active over passive is actually becoming more and more widespread. This is true at a mutual fund level or also seeing growing interest in new vehicles like active fixed income and equity ETFs, making this a growth area for our industry and for Janus Henderson.
Now, at a regional allocation level, as clients think about geopolitical realignment, the U.S. generally remains the focus for both equities and fixed income. And there’s also growing interest and investment opportunities outside of the U.S., which we haven’t seen in a long time. This is especially true about investing in Western European countries, including the UK, and developed markets in Asia. Emerging Asia isn’t yet getting a lot of interest, but we believe it may over the next year or so, and we’ve invested there as a firm. That being said, emerging markets overall do seem to be coming back into focus, whether it be the equity or debt, public or private exposure.
Another regular conversation point is a growing appetite for investments that tap into innovation.
So, biotechnology and technology are particularly exciting given the demographic and cost of capital macro trends we just talked about. Of course, AI is on everyone’s minds, both as an investment and on improving the way their own organizations work and, given our expertise, we can help with both.
Then also tied to the higher cost of capital driver is greater interest in fixed income, of course, notably multi-sector portfolios, securitized assets and regional portfolios targeting places like Australia, Japan and the UK in particular.
In terms of service delivery, clients are most interested in customization and personalization or, said a better way, mass customization and mass personalization that are becoming really table stakes for folks like us too. Clients want to feel like their asset management partners such as Janus Henderson understand their unique needs, and this will be an industry trend for some time to come. We’re expanding our capabilities accordingly to understand and meet our clients and their clients – your clients – needs.
Finally, these service level needs are reflective of a shift away from individual products and into solutions, especially among our most sophisticated clients. This extends to expectations of embedded portfolio management, which we of course do all the time broadly, but can also be provided as part of a solutions Portfolio Construction and Strategy, or what we call PCS offerings.
Other ways of achieving the specific outcomes clients are seeking include balanced equity and fixed income strategies, multi-strategy, quant overlays and model portfolios, and hybrid offerings blending public and private securities. We’re seeing more and more of those. These, particularly balance and quant overlays, seem to be a real focus of clients who want to tiptoe back from money markets or cash to take on a bit more investment risk but don’t want to go all the way. And there remains a ton of cash on the sidelines, something we’ve heard literally all around the world.
So in summary, there is currently more optimism than I’ve seen for some time for new things. And this is exciting time for us at Janus Henderson, including our over 340 active investing experts, over 500 client service professionals and the rest of our firm ready to serve you. Meeting clients, understanding of their needs, and being able to offer the right solutions to their and your problems is central to everything we do here at Janus Henderson.
We’ve been investing together with clients and their clients for 90 years, and our commitment to delivering a brighter future for all is as strong as ever. Thanks for listening. I hope this is helpful and bye for now.
Definitions and disclaimers
Managed investment portfolios may fail to produce the intended results. No investment strategy can ensure a profit or eliminate the risk of loss.
Exchange Traded Fund (ETF) is a security that tracks an index, sector, commodity, or pool of assets (such as an index fund). ETFs trade like an equity on a stock exchange and experience price changes as the underlying assets move up and down in price. ETFs typically have higher daily liquidity and lower fees than actively managed funds.
Quantitative overlay is a management style that seeks to harmonise, or balance, an investor’s combined positions across separate accounts or holdings. A quantitative or systematic overlay uses data analysis to calculate probabilities and seeks to make sure an investor’s strategies are implemented and coordinated efficiently.
As referenced in the video, 60 million people directly or indirectly entrusting their brighter futures to Janus Henderson reflects the estimated number of individuals as of year-end 2022 where either their current assets or future benefits are invested in Janus Henderson investment products and is based on JHI’s AUM market share by country, the size of the investing population by country, and average account sizes, using industry and government data and internal estimates.
Janus Henderson investment professionals and client service experts number as at 31 December 2023.
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