Posted inHead To Head, News

HEAD-TO-HEAD: First State versus Janus Henderson

FSA compares two Japan equity products: the First State Japan Equity Fund and the Janus Henderson Horizon Japan Opportunities Fund.
by Rupert Walker

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Investment approach

The funds have significantly different investment strategies and processes, according to Poole.

“Although the First State fund has exposure to giant- and large-cap stocks, it has a substantial commitment to high growth, mid- and small-cap companies,” he said.

Around half the portfolio is allocated to these sectors, and there is bias towards companies that generate their returns from domestic sales rather than export earnings.

“The fund tends to avoid the big banks and telco companies. Instead it tries to identify strong growth stories,” said Poole.

As a result, the fund mangers spend a lot of time visiting the sites and meeting the management of targeted companies.

“The process is very bottom-up driven, and consistent with the methodology instilled into all of First State’s Asia fund managers,” saidPoole.

According to Morningstar’s most recent report, the Japan equity team looks for high-quality companies that can deliver sustainable growth at attractive valuations.

The key influence on that process is Martin Lau, a managing partner of FSSA Investment Managers and the lead portfolio manager of several funds covering Greater China and Asia-Pacific, Poole noted.

In contrast, the Janus Henderson fund’s manager and analysts have a more sedentary methodology.

“The fund is entirely exposed to giant- and large-cap stocks, and the managers focus on market valuations to determine its allocations and take advantage of attractive entry points,” said Poole.

Top holdings include Sony, Softbank, global pharmaceutical companies Daiichi Sankyo and Takeda. Much of its portfolio replicates the Topix index of leading Japanese companies.

“It is a core-growth fund and generates stable returns quite closely aligned with its benchmark,” said Poole.

First State Janus Henderson
Size $190m $30m
Inception 2016 1985
Managers Sophia Li, Martin Lau Junichi Inoue
Three-year cumulative return 40.17% 18.50%
Three-year annualised return 11.28% 4.52%
Three-year annualised alpha 5.63 -0.29
Three-year annualised volatility 16.23% 11.90%
Three-year information ratio 0.62 -0.13
Morningstar star rating ***** ***
FE Crown fund rating – ****
OCF (clean share class) 1.87% 1.89%
Source: FE Analytics, Morningstar (Data in US dollars, 18 October 2019)

Fund characteristics:

First State Janus Henderson
Number of holdings 50 29
Assets in top 10 holdings 39.89% 47.39%
Average mkt cap $6.96bn $27.29bn
Source: Morningstar, 30 September 2019

Sector allocation:

  First State Sector Janus Henderson
Basic Materials 3.20% 3.49% 4.03%
Consumer cyclical 17.01% 14.66% 15.64%
Financials 1.89% 8.55% 9.33%
Real estate 4.40% 5.04% 6.92%
Consumer defensive 23.59% 10.51% 11.88%
Healthcare 3.54% 9.22% 10.42%
Comm Services – 4.86% 5.86%
Energy – 1.25% 2.94%
Industrials 25.10% 6.13% 6.48%
Technology 21.27% 24.91% 26.50%
Source: Morningstar, 30 September 201 

Top 5 holdings

First State % weighting Janus Henderson % weighting
Keyence 4.76 Sony 6.50
Monotaro 4.46 Softbank 5.72
Recruit 4.15 Daiichi Sankyo 5.35
Shiseido 4.06 Takeda Pharmceutical 4.82
Workman 4.01 Nomura Research Inst 4.63
Source: Morningstar, 30 September 2019

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