In a year where credit markets didn’t treat funds well, the Janus Henderson Australian Fixed Interest Fund has come out on top of the Australian fixed income category, partially because its strong interest rate management means that it hasn’t had to take on much credit risk to achieve results.
According to co-head of Australian Fixed Interest at Janus Henderson, Jay Sivapalan, fixed interest managers aim to add value above the benchmark in three ways: through interest rate management, sector allocation or credit and multi-country allocations.
Most managers tend to rely on the second way, which works eight out of 10 times. Some also incorporate the third, multi-asset allocations, but Janus Henderson had observed that managers who have gone down this path are good in theory but struggle to add value long-term.
The Janus Henderson fund, in contrast, also engages in interest rate management to utilise all three value-adding ways.
“The benefit [of interest rate management] is you can help smooth out returns and preserve capital over long periods of time,” Sivapalan said, adding that philosophically there’s also benefits to having less reliance on credit.
While incorporating interest rate management into its investment strategy means the fund tends to lag a little in strong markets, Sivapalan said it means it outperforms in down markets, explaining its victory over its peers in the category this year.
Last year was a...