HEAD-TO-HEAD: Blackrock versus Janus Henderson

123456

INVESTMENT APPROACH

Both the Blackrock and Janus Henderson primarily invest in global technology equities. While the funds look at the same investment universe, the portfolios are entirely different.

The Blackrock fund is benchmark-agnostic, while the Janus Henderson offering is more benchmark-aware, according to Meakin.

“The BGF World Technology follows a benchmark-agnostic approach that sees significant underweights to index heavyweights such as Apple and Microsoft, preferring instead to focus on areas where the manager believes there are higher-growth prospects,” he said.

The fund’s manager, Tony Kim, looks at an investment universe of 1,300 stocks. Kim and his team scan the market for “intriguing” early-stage companies capable of disrupting industries and then divides the universe into six categories: hardware, software, internet, semiconductors, services, and games and data centres, according to Meakin.

He added that the portfolio is split into two sleeves: core and opportunistic. The core bucket usually accounts for 50-60% of the portfolio, consisting of larger-cap names.

“Yet he underweights large hardware names, such as Apple and Samsung, because their growth prospects don’t meet his criteria,” he said.

The remaining assets will consist of opportunistic holdings, which Kim considers emerging firms.

“Kim takes a venture capital approach to this sleeve, moving in and out of names competing for similar market share,” he said.

Meakin noted that Kim is not overly aggressive and leverages on Blackrock’s risk-management system, Aladdin, to monitor unintended portfolio bets and will sell covered calls to damp volatility when valuations get stretched.

The fund is diversified, having around 100 to 120 names, with the top 10 accounting for 25% of the portfolio.

Turning to the Janus Henderson offering, Meakin said that it tends to maintain larger positions in the index heavyweights to limit benchmark risk.

“The portfolio will therefore hold positions in the largest benchmark constituents even if the team has a neutral view,” he said. However, he noted that the team has reduced the number of neutral-rated stocks since 2015-2016, in line with its desire to increase conviction in the portfolio.

The fund’s investment approach involved the managers identifying the growth potential of companies. They have a focus on barriers to entry, which they believe should provide sustainability to that growth.

They also look to understand the nature of the competitive advantage to get clarity on the core long-term drivers of earnings, which includes an analysis of competitors, customers, suppliers and market share trends.

The managers also try to avoid overpaying for growth, and this means they steer clear of the initial hype stages in newer areas of technology. Instead, they wait for the winners to become more clearly identifiable.

The fund is more concentrated than the Blackrock fund, holding only around 50 stocks, Meakin added.

The differences in both processes are reflected in the fund’s portfolio.

For example, the Blackrock fund’s market-cap profile includes more assets in mid-cap companies, while the Janus Henderson fund is tilted more towards large-cap names, according to Meakin.

Source: Morningstar Direct

The Blackrock fund’s greater focus on growth also shows up in the fund’s valuation metrics, with a significantly higher P/E and P/B ratios than the Janus Henderson offering, which is more valuation conscious, according to Meakin.

Source: Morningstar Direct

“The Janus Henderson Global Tech Leaders, with a focus on valuation, can therefore tend to avoid the very high growth end of the market,” he added.

Top 10 holdings

Source: Fund factsheets. As of end-November 2020.

Country allocation

Source: Fund factsheets. As of end-November 2020.

123456