February 2018

Global Emerging Market Equities Webcast


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Speaker Key:

GF: Glen Finegan, Head of Global Emerging Market Equities
IT: Ian Tabberer, Investment Manager, Global Emerging Market Equities

IT: Thanks for joining us today. I’m Ian Tabberer, Investment Manager on the Edinburgh‐based Janus Henderson Global Emerging Market Equities Team. With me I have Glen Finegan, Head of the Global Emerging Market Equities Team. This is the first webcast of its kind from the GEM team here in Edinburgh and we hope to make the call a regular fixture, and are very happy to have evolved the format based on feedback on what’s useful and what’s not. Today we’re going to give a quick recap of who we are and what we stand for, then we’ll look at the current portfolio in the context of some of our key focus areas.

IT: As you know, we are long‐term investors and the portfolio does not change substantially quarter to quarter, therefore we will use these calls to focus on certain areas and explain how they currently impact the portfolio. We will then conclude with a Q&A, answering some of the pre‐submitted questions we’ve received. We have investors from around the world and will therefore keep the discussion at a strategy level rather than referring to specifics of performance or weightings of individual funds or mandates. And as always, we’re very grateful for the ongoing support that we receive from our clients and thank everyone who’s dialed into the call today. And with that, I’ll hand over to Glen.

GF: Thank you, Ian, and thank you all for dialing in to listen to today’s webcast.

GF: My name is Glen Finegan, I’m Head of the Global Emerging Market Equities Strategy, based in Edinburgh for Janus Henderson. I think what we’ll try to do is introduce the Edinburgh investment team, which is a pretty distinct unit within the firm. Talk a little bit about our culture and our thoughts about investing. I’ll take you through our investment philosophy, our approach to emerging markets, and then we can talk a little bit about the makeup of the strategy and maybe some of the ways that we think about the strategy and how it’s constructed, which might look a little bit different perhaps to just looking at the strategy from a simple large holdings perspective. So we’ll run through it in that respect.

Introducing myself, I’ve been investing in emerging markets since around 2001. I’ve previously worked on the First State Stewart team, which was a team that ran a large emerging markets book of business. I was there from about 2001 until 2014. I came to what was Henderson to build an emerging markets business very much in the image of what I’d left. I was a strong believer in the First State Stewart investment philosophy and approach. I didn’t come here to reinvent the wheel philosophically, but the idea of building a new franchise excited the entrepreneur in me, let’s say, and a blank sheet of paper was available here at Henderson, what is now Janus Henderson. A blank sheet of paper was available to create, or at least to attempt to create, an emerging markets franchise.

I joined at the beginning of 2015 and since then I’ve been building a team based here in Edinburgh, shown on the current slide. My colleagues, Nicholas Cowley, Stephen Deane, Michael Cahoon and Ian Tabberer, all have many years experience investing both in the developed world and in the emerging markets. Stephen Deane worked together with me at First State Stewart for a number of years and also came across here to build this franchise. Mike Cahoon has a lot of experience looking at Africa, particularly Africa, but came here to be an emerging markets generalist. And Nick Cowley has looked both in the developed world but also Latin American equities, and again now has become an emerging markets generalist. Ian Tabberer, who’s just introduced himself, Investment Manager, is the newest member of our team and has taken a lead on many of the client-facing responsibilities that include improving and ensuring our client reporting is up to scratch and also some of the business development activities that take place on the team.

On the right hand side of the slide we’re showing the Global Equities Team, which is also part of our Edinburgh‐based investment team. It’s headed up by Ian Warmerdam. Ian and I go back quite a long way. I have a lot of respect for Ian as an investor and I’ve got to know him over many, many years. Another attraction to come and work with Henderson was the opportunity to work together with Ian, and we sit here in, as I mentioned, a fairly independent unit based out of an office in Edinburgh. The headquarters of Janus Henderson is London and they have operations in Denver and also Singapore. But this office really is quite a distinct unit. Ian runs a global equities product and I’d encourage anyone to look at it. It’s got a somewhat similar approach in terms of how he builds his portfolios in an index unaware and high conviction fashion.

But we’re not here to talk about global equities, we’re here to talk about emerging markets, so from that point I will talk a little bit about our investment philosophy and how we go about building the portfolios in the emerging markets.

GF: As Ian said, we run a number of different mandates and pooled funds, but we’re going to talk about this just from a strategy level. Our strategy is an all‐cap strategy, so it genuinely invests across the market‐cap spectrum. Because of that, and we want to maintain that ability, there is a capacity constraint inevitably. Our team today runs something in the region of $4.5 billion to $5 billion. So we still have scope to grow all‐cap capacity, but we are more than aware that this is not an open‐ended strategy and we are quite prepared to close and stop raising new assets at the appropriate time. So we’re discussing an all‐cap approach to emerging markets in this webcast.

We’re bottom‐up investors. We do not believe the index is a sensible guide to constructing portfolios that are providing risk‐aware exposure to the developing world. We’re long‐term investors. The investments that we make are made with the intention of being long‐term owners of those companies. When we do present price targets or what we think companies might be worth to one another here on the team, that is always in the context of thinking in terms of three but more normally five years. And the turnover of our funds reflect that. The turnover on strategies that we run has tended to be really very low. We guide around 30% So we are long term, essentially buy and hold investors, and we’re constructing our portfolios without any reference to the index whatsoever. Instead, looking bottom up for what we define as good‐quality companies.

I’m going to define in more detail what we mean by quality companies, but in a nutshell this is one way that we think we can protect ourselves from losing money in emerging markets. Emerging markets can be exciting. Lots of demographic tailwinds. Lots of large, youthful, growing populations, growing middle classes, people aspiring to live better lifestyles than their parents, and all of these things are exciting drivers in some parts of the developing world. But there are risks. Legal protection for minority shareholders is often not as good as one might hope in emerging markets. Political risks, and political risks are everywhere, as we know, but in emerging markets very often the businesses and the politics are quite closely intertwined and political risks can quickly become risks to minority shareholders in emerging markets. And these are risks I think one needs to be cognizant of when looking bottom up for good‐quality companies.

And we look for good investment ideas in emerging markets, and one of the ways we try to protect ourselves from this weak rule of law environment and what can be risky political environment is look for businesses that are run by individuals we think we can trust. Sounds very straightforward. Basically common sense. But the index is not constructed in that way whatsoever. The index is really a mist of large companies in emerging markets more than a guide to quality, and our watch list of companies is more based on how we judge the integrity of people behind businesses and how we think their integrity may be able to protect us from some of the risks inherent to investing in emerging markets. And hopefully also it gives us exposure to some of the most exciting opportunities that may exist in some parts of the developing world as well.

So we’ve built a watch list based on good‐quality companies and we’ll talk a little bit more about good quality companies. But our portfolio is not just a list of good‐quality companies, because we don’t think quality at any price is an appropriate investment strategy. We believe one has to buy quality at a reasonable price. And because of that we apply a very strict valuation discipline to our watch list of businesses, and there are many businesses on our watch list today that are simply too expensive to invest in at current levels, and they remain on our watch list and we hope for better opportunities to buy. Instead, our portfolio represents where we think good‐quality businesses are available at a reasonable price today, in the developing world. And because of that again it looks very, very different to the index.

The final point here is designed to sort of encapsulate our investment philosophy. If you don’t look at the index as a guide to building portfolios, or even think of it as a sensible measure by which to judge whether or not you’re doing a good job over short periods of time, what do you look at when it comes to thinking about are you delivering for your clients? And this is how we try to sum it up. We are more absolute return investors than relative return investors, and because of that we view the biggest risk to investing in emerging markets is losing money. So we define risk as losing money. And when we’re thinking about: What is a reasonable price? Assessing quality, we can talk about some of the things that we look for. But assessing what’s a reasonable price or weighing up what’s a reasonable price to pay for a good‐quality business, we try to link that back to a real required return rather than anything relative in nature.

Historically, I’ve used around about a 12% required return when looking to try and decide whether or not businesses may be available at a reasonable price. This approach, that’s been applied consistently over many years, has delivered compound returns on portfolios that have exceeded that of the index, but it doesn’t work all of the time. And very often where markets are frothy, when emerging markets are in favor and the asset class is in vogue and people are more excited about the opportunity than perhaps thinking about some of the risks, you get a degree of momentum. We do not tend to participate in those types of markets. We have more of a sell early to try and protect to the downside approach to investing in this asset class. And because of that we’ve tended to lag very strongly rising markets, historically, and we are today.

But on the flip side we’ve tended, historically anyway, to protect value much better when risk aversion is rising. And most recently ‐ 2015 was a very difficult year for emerging markets ‐ our strategies did much better than the peer group benchmark. We think this outcome is linked to a refusal to compromise on quality and also this consistent application of a strict valuation discipline. So that’s a little bit about philosophy. I’ll talk about process on the next slide.

GF: Now this, along the bottom of the slide you can see we’ve a fair watch list of companies we’ve built, where we think companies are good enough quality to own. We think we’ve got about 350 or so of those businesses. Our portfolio today has around 70 holdings in it, and as I mentioned that is an all‐cap list of companies, so we have some companies with small free floats and some of the very large companies in there as well. But genuinely an all‐cap approach to emerging markets. Now, 350 companies isn’t very many when you consider an opportunity set that’s very, very large. There’s a lot of countries that make up the developing world and populations of billions and billions of people and we’ve distilled a list, a shortlist of companies. And that partly reflects some of these risks in emerging markets.

More than a quarter, nearly a third, of the emerging market index as at the year end 2016 was controlled by governments. Governments either had significant influence over or direct control of businesses making up the index. And for us, we don’t like to invest alongside governments generally. We find that our minority shareholders interests tend not to be aligned with governments anywhere in the world. Politicians have a different agenda, whether they’re dictators or whether they’re democratically elected. They tend to have a different agenda to minority shareholders who want to earn a risk‐aware return on their investment. So that’s a big chunk of the listed universe in the emerging world that we don’t really feel is appropriate to invest in. So a big chunk of narrowing down the opportunity set is taken care of by discarding companies that we simply don’t believe are run for the benefit of minority shareholders.

So how have we built the watch list that we have? We’ve been investing in the emerging markets for, I have anyway, for 17 years or so, and the watch list that we’ve built has been created by spending vast amounts of time traveling around the developing world. Getting to know company management teams via face to face meetings in their offices or sometimes at conferences. Looking at their operations. Physically traveling and looking at their operations. But most importantly, speaking to other business people in the developing world who we have built a lot of respect for their integrity. So if you look at the watch list of businesses that we had you’ll find that there’s lots of interconnectedness. We have multiple companies controlled by the same family group, and I’m going to show you that later. We have companies that have formed joint ventures with other companies we respect or we have grown our respect for over time. Suppliers to customers of businesses.

So very often when we come across a new idea on a research trip, we’ll immediately then try to cross-reference, look for an endorsement from a business we’ve already got on our watch list. And we find that our watch list of businesses not only give us a reservoir of ideas to invest in, but also a Rolodex of contacts we can ask opinions of. Would you do business with this group? Do you trust these people? What is your opinion of these people? And it’s a non‐sell side, non‐investment approach. It’s more of a business person’s perspective on another business group. And we find those endorsements very useful, or trying to seek out those endorsements very useful in establishing whether or not companies are good enough quality to sit on our watch list.

The portfolio, as I mentioned, is ultimately trying to get these good‐quality businesses at reasonable prices. Sadly, within the 350 or so listed companies there are businesses we’d love to own but we simply can’t because the valuations are too high. Many of the Indian consumer companies. I have historically had lots of exposure to Indian consumer companies. Today the valuations are just too high. We’ve been substantially reducing our exposure to Indian financials over the last few months, because the valuations are just too high. Good‐quality businesses growing, run by people we think we can trust, but valuations are too high. So we want to buy good‐quality businesses at a reasonable price. Luckily, having the watch list means when we come across a good‐quality business we feel is too expensive, it’s not wasted work. It goes onto the watch list and it’s there for the future when opportunities present themselves. The portfolio, as I mentioned, is about 70 holdings today.

GF: So that just describes what we mean by quality in terms of trying to define it. It’s gray. It’s not black and white. We don’t have a screen or a quantitative model that can give us any answers to whether or not companies are good enough quality or anything. It’s a qualitative assessment of whether or not you feel your interests as a minority shareholder in a company will be sufficiently protected.

The first question we ask ourselves, if you come across a new idea, does this company have a record? A long‐term track record? A history? Is there evidence that this company has exhibited good corporate governance and alignment with its minority shareholders over long periods of time? And in many cases in the EM, that rules out the company. That very first, what feels like a simple question, rules out many, many businesses. Many of the state‐controlled companies, for example, are ruled out by that. Does a legal structure exist to protect you, the minority shareholder from controlling shareholders? And many of the companies in emerging markets are controlled. That test rules out the Chinese Internet sector for the time being. Unfortunately. It’s been a rapidly growing sector and it’s delivered good returns for shareholders of those businesses. But the legal structures around those businesses do not protect minority shareholders. That could be a risk that means very substantial absolute losses could happen if those weaknesses were ever to result in minorities having their rights abused in some way.

We look for businesses where we feel our rights are properly protected, and we apply that evenly across the world. We do not invest in Brazilian preference shares. We only own Brazilian common shares, for example. Common shares actually represent control of a company and preference shares less so. In some cases in Brazil it’s not always clear exactly what your rights may be. So we look for businesses where we’re confident our rights are going to be protected as minority shareholders in the business, because we are foreign minority shareholders. We look for strong track records of financial delivery, and we care about how those track records have been delivered. The businesses we like to own tend to have built their franchises in a conservative way. [There are] many companies who’ve taken highly risky leveraged gambles, or acquisitions if you like, to build their franchise. And those gambles may have paid off but they haven’t built those in a conservative fashion. We like companies that have operated conservatively for long periods of time.

We’ve spent a lot of time thinking about non‐financial risk. We’ve got a slide on this later. But ultimately we do not separate social, environmental type research from investment research. It’s the same thing. Our goal is to avoid losing money. You can lose money because of a financial problem in the company, but equally poor social performance, poor labor practices, poor environmental practices, refusal to pay your taxes. All of these things are equally likely to lead to large losses for minority shareholders, and that’s what we’re trying to avoid in emerging markets.

Businesses we own tend to have exhibited pricing power over many, many years. We prefer companies with the ability to make price rather than price takers, so our portfolios are biased much more in favor of brand‐owning businesses, businesses with intellectual property, and businesses that have weathered previous downturns. I mentioned Brazilian companies just a moment ago. We have a relatively significant exposure to Brazilian businesses today. Brazil’s been through a very, very deep recession. The companies we own have been very resilient through that recession and that gives us confidence. And they’ve been resilient through previous recessions such as the one in 2009, such as the turn of the century. And going all the way back sometimes to the 1950s in some cases. Resilient businesses, businesses that have survived previous downturns are more likely to be run by people who manage them in a conservative manner and they’re likely to survive future downturns.

We look much more at cash flow than we do accounting profits, and when I talk about our attempt to value companies based on a five year view, we’re trying to value cash flow most commonly. There are always exceptions, and you might be looking at the placement profit of assets or some physical metric, but in the main we’re trying to value cash flow. We don’t spend a lot of time on profit and loss statements because we find they’re so easy to manipulate. Cash flows are much harder to manipulate. So that’s some of the things that we look for when trying to establish whether or not we think companies are good enough quality to be included in our watch list, and as I’ve mentioned today our watch list is around 350 or so businesses.

GF: I’ll talk a little bit about the positioning of the strategy. Because of the outcome of where we believe quality is available at a reasonable price.

GF: And I just wanted to show you one thing and make a couple of points about … But firstly, you can see top 10 holdings, 30%. Top 20 holdings, 50%. Concentrated portfolios. Yes, 70 positions. Yes, allcap representation in the portfolio. But we back our conviction. Next thing to point out is it doesn’t look anything like the index, so unsurprisingly the outcome is quite different to the index. But it looks nothing like the index. Enough evidence, if you need any, that we have no reference to the index when it comes to constructing our portfolios. We build our portfolios starting with a blank sheet of paper.

On the right hand side, I normally don’t put the index at all in our presentations but Ian wanted me to show you just how different it looks because these are the top 10 holdings in the index today. As you can see, it’s highly dominated by Internet and technology businesses. Some people may say the Internet technology sector is approaching some sort of bubble level of valuation. We certainly don’t see a lot of value in some of these businesses. And I didn’t mention it but I should, members of our team have a lot of their own money invested in the funds as well, which only reinforces this idea of focusing on absolute returns rather than chasing relative returns. So the funds look very, very different to the benchmark.

GF: On the next slide you can see the sectoral outcome. Our funds are constructed bottom up. It’s about finding good‐quality companies that we believe we can own for the long term where we hope valuation means we can make our required return. The sectoral outcome is merely the outcome of that bottom‐up stock picking, but there are some fairly consistent features of our sectoral breakdown. We’re more interested in investing in long‐term, predictable growth opportunities that may be available in emerging markets than we are in trying to get short‐term product cycles or more concept type investments, or even very, very cyclical commodity type investments. As I mentioned, we prefer companies that have some pricing power. We find more companies in the consumer staples space operating in emerging markets where they have demonstrated that they have strong brands over many, many years, and those strong brands have given them pricing power.

Emerging market currencies are likely to devalue from time to time. We don’t try to predict when that’s going to happen. We don’t think that’s a particularly easy thing to do. But we do want to own companies that have some form of protection to devaluation and the inevitable inflation that creates. Because some of the consumer staple companies available to minority shareholders in emerging markets offer this type of protection. Now I mentioned some of them are too expensive. The Indian consumer staples, we think are too expensive. Many of the Southeast Asian consumer staples, we think are too expensive. But fortunately some parts of the developing world, good‐quality consumer staples companies are available at reasonable prices, and we’ll talk about a few in a moment, but in Africa is one area where these businesses look reasonably good value.

We do have a significant weighting to financials. We own no government controlled banks, I want to be quite clear about that. We don’t think politicians make good lenders. And all the banks we own are privately controlled. Essentially they are, we believe anyway. There is real, significant evidence that the lending decisions that they make are risk‐aware and that earning a proper return, a risk‐adjusted return, is the main goal of the decision makers behind these financial institutions. Many of them also operate in markets where credit to GDP is very low, which is another opportunity within emerging markets, that that can grow slowly over time.

GF: Just moving on to the next slide, country breakdown, regional breakdowns of our portfolio strategy at the moment. Again, purely the outcome of bottom‐up stock picking. But the fact that we find it hard to invest alongside state‐controlled companies, the fact that we find the China Internet company legal structure to be quite risky and difficult to assess how risky it is means that we’ve struggled to find good ideas in China. We have some, but we’ve struggled to find many. On the flip side, we’ve found many ideas in India outside of the expensive consumer area. Lots of ideas in Africa. Lots of ideas in Latin America. Interestingly, whilst we don’t invest substantially in commodity companies, Latin America and Africa bore the brunt of the significant commodity price falls of some years ago, and because of that demand for many, many things has been suppressed. And in some cases like Brazil even very deep recessions. But recessions and tough economic times oftentimes lead to more attractive valuations of good businesses. Good businesses in Brazil were available at very attractive valuations a year or two ago, and in some cases still remain at reasonable valuation. In South Africa we think valuations are really very attractive. We understand there’s some political noise there, but thinking on a five, even longer term view, the best quality businesses in South Africa are expanding into Africa and that’s a huge longterm opportunity to grow, and we own a number of companies.

GF: Just to bring the portfolio to life a little bit on the next slide, I just wanted to show some of the people we’re investing alongside in our portfolios.

GF: It’s all about, for us, trying to identify individuals who we think have demonstrated sufficiently strong integrity, as well as financial delivery integrity, as well as financial delivery over the long term, and these are some of the individuals behind businesses we’re investing in. We have reduced our exposure to HDFC, India’s leading private financial business, because we felt valuations were high. The quality of this business is extremely good, valuations were high. Mr. Birla in India has built some fantastic franchises, including UltraTech, the leading cement business there, and he’s currently still building out some interesting financial businesses as well. Mr. Luksic, I’ll show you on the next slide, is our largest holding. If we just move on to the next slide.

GF: The Luksic family are the wealthiest family in Chile and they are an entrepreneurial family. They’ve built a number of businesses in Chile. On the left‐hand side you can see our top 10 holdings. If you look at one of our fact sheets, this is what you’ll see. However, when I think about our top holdings in our strategy, I see it quite differently. It looks more like the right‐hand side to me. Our biggest exposure is the Luksic family, as I mentioned. Originally a Croatian family who moved out to Chile and established businesses. They control Antofagasta, the leading copper miner listed in London. Quiñenco is the family holding company which has stakes in many businesses in Chile and Latin America. Vapores is a Chilean shipping business that has a large stake in Hapag‐Lloyd, a global container shipping business. CCU is the largest brewer in Chile but also has operations in Argentina, Paraguay and is building a business in Colombia.

Uni‐President Group is our second‐largest holding, family controlled, based out of Taiwan.It has businesses in Taiwan, of course, in convenience stores, in retail more generally. It has the Starbucks franchise in Taiwan. It operates 7‐Elevens in The Philippines, and additionally has for many years been building what we think will become and is becoming a very, very strong branded food and beverage business in China. We own a number of Uni‐President controlled companies and when I think about: Who are we exposed to? Where is our integrity risk lying, if you will? I aggregate the holdings in my mind.

Mr. Birla, we have exposures to Aditya Birla Capital, his holding company, Grasim Industries and also Idea Cellular, which is merging with Vodafone to become the largest business in mobile in India by subscriber numbers. So again, aggregating those holdings, nearly 5% of our strategy is exposed to Mr. Birla. So we’d better be confident that he’s going to look after our interests, and that’s where a lot of our work is. So this is how we look at our businesses. More family groups here. LG Group is a family group based in South Korea. Heineken, a well‐known family‐controlled company. We’ve recently just also added Nigerian Breweries to their holdings.

GF: I’ve talked a bit about ESG on the next slide. I don’t think we need to go into it any further.

GF: And maybe just on the final slide, I just wanted to show that as a long‐term owner of businesses, we feel it is our duty to engage with the managers and owners of those businesses where we feel things can improve or where we may have learned lessons in other markets and bring those lessons and assist or at least encourage positive change in some of the businesses we own. So we do keep a rolling list of our corporate engagements, just to demonstrate to you that we’re not passive investors. We are active in the sense that we want the managers of the businesses we invest in to know that we think of ourselves as owners of the companies alongside them and we want to play the part of an active owner.

GF: I think in conclusion, I’ll say that first and foremost I view our team’s job as preserving capital. Thinking about investing in the developing world? Hopefully the developing world offers an opportunity for businesses to grow, but our job is to avoid businesses with poor governance where risks of losing money are high and difficult to assess. Our job is preserve as well as grow our client capital. We do that by insisting on a high bar of quality, and by that we mean investing only alongside owners and managers we believe have demonstrated integrity and delivery over the long term. And this is gray. Every stock in our portfolio we can have a debate about the relative merits of the individuals behind. But we believe we are fishing in a pool of the highest quality business groups available to minorities in the emerging markets. We stay focused on the long term. We don’t make short‐term, knee‐jerk portfolio changes in response to news flow. Very often short‐term news flow creates opportunities for us to add to positions. And we try to enjoy what we do, and I think that’s an important part of doing this job for the long term.

GF: So I’m happy to take any questions there may be, and hand back to Ian.

IT: OK. Thanks very much, Glen, for that. That was really useful. Now I’ve got a couple of questions already, so I’ll start off with the first one. I think I probably know the answer to this, but I will ask it anyway. So the strategy is driven primarily from the bottom up, but do you worry about the risk potential of big sector deviations?

GF: The short answer to that is … the word deviation implies looking at it versus something, and we don’t look at it versus anything. Well, we look at it versus our desire to earn a real required rate of return. A hurdle rate. And sector deviations to my mind don’t necessarily feed into that. So versus the index, yes the strategy looks very, very different, but that’s a result of bottom up stock picking. The big sector deviation that’s raised sometimes at the moment is in the IT sector. We have a number of IT stocks, technology stocks, on our watch list that are not constructed under the Chinese VIE system, but we find those very expensive. It’s a sector that’s very, very popular. There’s lots of long‐term, blue sky opportunities priced on artificial intelligence, hyperscale computing, all these things that are very hard to put any sort of tangible value on. Self‐driving cars, all these things, yes, that are very hard to put any sort of tangible value on.

Yes, these are very, very long‐term things and I’m afraid that a lot of this stuff is getting into companies today, and we view most of the technology sector companies that we look at have historically been quite cyclical. They’ve been quite vulnerable in recessions and we’ve had quite a long period of expansion since the 2009 crisis and interest rates were cut to nothing. We’re probably overdue a recession globally and many of these companies could be a lot more vulnerable than the current valuations suggest. So we don’t find many technology companies we can buy.

IT: OK, great. Thanks. One other question. You say you interact closely with the global equities team in Edinburgh. Could you give an example of a stock you introduced to them and vice versa? How does it work between the two teams?

GF: Well, we all sit together here. It’s a small office here in Edinburgh. We share meetings. And I think the interaction works on many levels. First and foremost, it works because we have similarly long time horizons, and neither of us spend a lot of time, any time, thinking about the index. And that means we’re able to have sensible conversations with one another because we both share a similar goal. Long term, risk aware, absolute return. That’s why it works. In terms of tangible examples, the global equities investment team knew a lot more than me about the developed world pharmaceutical sector, and thanks to their knowledge and their interaction with developed world pharmaceutical businesses, they were able to highlight to me some of the risks around the Indian generics business. Now, we have lost a little bit of money in an Indian generics business, but I would have lost far, far more had it not been for some of the risks, many of them have begun to crystallize, of this sector that were highlighted to me. The world has become very globalized, it’s becoming more globalized, businesses are more globalized, and trends, things happening in the developed world that they’re closer at important times can have a very direct impact on companies that we’re investing in. So that’s one example. I wish I’d listened to him entirely and had zero exposure, but I had far, far less thanks to the warnings highlighted to me via Ian and his team.

In terms of the other way round, while we’re scratching ground bottom up in the developing world and we find interesting ideas and sometimes those strike a chord with the global equity guys. And in some cases in Africa. I’m going on quite a lot at the moment, but I think good‐quality African businesses that may have decades of growth ahead of them, thanks to underpenetrated markets and large and growing populations all over the African continent, many of these businesses are listed in Johannesburg in South Africa, and people are miserable about South Africa, following what they have seen in the newspapers.

But many of these businesses are very well governed, have excellent conservative financial track records and potentially decades of growth in front of them, just on the African continent. I’ve been highlighting the current valuations of these companies, they’re quite attractive, and a couple of those ideas have made their way into their global equities strategy, which is complimentary to us but we’ve chosen to let them go. So it works that way. We sit together and discuss our best ideas and challenge them. But to be quite clear, Ian Warmerdam is absolutely and wholly responsible for the performance and stock selection of global equity, and the same applies to me and my team who are global emerging markets.

IT: Well, Glen, thanks very much for your time today. We really, really appreciate it. So unfortunately we’ve run out of time, and a Janus Henderson representative will get back to anybody who had a question that we didn’t have time to answer. We’ve covered a lot of ground today and I hope it’s been useful to you all. So, from Glen and myself, thank you very much and have a good day.

GF: Thank you.

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