In this interview, Jeremiah Buckley, co-Portfolio Manager of the Janus Henderson Balanced Fund, discusses what he and the portfolio management team view as the key themes driving markets amid the global economic recovery, and how those themes are shaping their investment approach.

What is the purpose of dynamic asset allocation in the Fund?

The Fund’s allocation to equities and fixed income is dynamically managed by the portfolio management team. The growth-oriented equity sleeve primarily provides the potential for capital appreciation, while the actively managed fixed income sleeve seeks to reduce volatility. Our ability to adjust the allocation between the two gives us flexibility to navigate a variety of market conditions.

What are the major market themes you are seeing amid the economic recovery, and how are they impacting positioning on the equities side?

The pandemic accelerated a number of secular growth trends that we expect to further cement themselves as the global economy reopens. The shift to cloud computing and Software as a Service, for example, was spurred along by companies seeking remote work solutions for their workforces. Changes in consumer behavior also quickened the pace of trends such as e-commerce and digital payments, when widespread stay-at-home orders forced many to adopt these services. These behavioral changes will likely remain entrenched after the pandemic now that individuals have become more comfortable using these services and accustomed to the conveniences they provide.

As restrictions ease, we are also starting to see green shoots of activity in travel and indications of significant pent-up demand that will be released as more markets reopen to tourism and business travel. And of course, the importance of innovation within the health care sector has been heightened. Investments in research and development (R&D) continued to be robust through the pandemic, which we believe will continue to provide valuable innovation in pharmaceuticals and medical devices in the years to come. Those companies that are improving treatments and outcomes for patients should be positioned for success once we fully emerge from the crisis. The health care industry should also benefit from patients resuming regular doctor visits and putting previously postponed procedures back on the calendar.

Ultimately, we believe the Fund is well positioned for the current environment, focused on higher-quality, cash flow generative companies that we expect to be long-term winners amid the digital transformation and the continuation of these secular trends that were further engrained during the pandemic.

How are you identifying companies you expect will be those long-term winners?

In general, we expect companies with stronger balance sheets and ample liquidity to emerge from the pandemic in a position of strength. Crises typically allow higher quality companies to grow market share and strengthen their competitive advantages at the expense of those in weaker financial situations. Therefore, it is now more important than ever to identify companies that are in a position of financial strength and those in a favorable competitive position to capitalize on long-term secular themes. To that end, we employ fundamental, bottom-up research, with our equity and fixed income analysts working side by side to analyze a company’s place among peers and the potential secular growth of the end markets in which it is investing, to choose investments for the portfolio. I believe this focus on individual security selection across equity and fixed income markets is one of the key differentiators in our investment process.

What role can the Fund play in a portfolio, particularly for investors saving for retirement?

One of the goals of the Janus Henderson Balanced Fund, which we consider critical to those saving for retirement, is to keep investors confident and invested through volatile markets. We can adjust the equity and fixed income weightings based on what we believe offer the best reward for the risk taken. Similarly, we can change the composition of the holdings in each sleeve, adjusting our risk profiles to cater to the opportunities and risks in a given market environment. In this way, we seek to strike a balance between the dual goals of capital appreciation and capital preservation, aiming to participate on the upside while seeking to mitigate downside risk.