HEAD-TO-HEAD: Janus Henderson vs BNP Paribas Parvest

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Of the two funds, Janus has more exposure to the speculative biotech sector. It can benefit handsomely if the biotech bets pay off but could suffer harshly if the companies fail with new products.

For investors with less of a risk appetite, the Parvest fund could be considered. It has more exposure to the pharma industry. While pharmaceuticals are also risky, most companies in the portfolio have well-established fundamental businesses and the failure of a new drug is unlikely to sink the company.

Parvest also has a high conviction portfolio, suggesting the team can put strong focus on fewer names.

Both biotech and pharmaceuticals are also subject to government regulations, which are not easily predictable and therefore could have significant impact on the healthcare sector.

Diversification to other sub-industries should lower, in principle, the Janus fund’s volatility. This is, however, contradicted by the two funds’ three-year volatility measure, which is higher for the more diversified Janus fund.

The Janus fund is more volatile due to its higher exposure to the biotech sub-industry, which is intrinsically more volatile, according to Ng. The broader diversification among sub-sectors, however, mitigates the risk of downturn in one sub-sector.

Nevertheless, Ng said he would choose the Janus fund out of the two, for several reasons: its better long-term performance, its broader diversification and its higher exposure to biotech.

He also stressed the industry expertise of the management team. “They realise that investing in the biotech sector would lead to higher volatility but still feel that the sector has better prospects in the long term.”

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