The combination of an Average People Pillar rating and a Below Average Process Pillar rating limit  Janus Henderson Small/Md Cp Gr Alpha ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy earns a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in quality exposure and yield exposure compared with category peers. A high quality exposure means holding stocks that are consistently profitable, growing, and have solid balance sheets. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The team managing the passive strategy earns the strategy an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Janus Henderson Small/Md Cp Gr Alpha ETF earns a Below Average Process Pillar rating. 

The process is strengthened by tracking an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. However, the rating is weakened by the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 69% also weakens the process.

 This strategy tends to hold smaller, more undervalued companies than its average peer in the Mid-Cap Growth Morningstar Category. Examining additional factor exposure, this strategy has consistently favored high-quality stocks, including those with low financial leverage and solid returns on equity, compared with Morningstar Category peers during recent years. High exposure to the quality factor means holding companies that are consistently profitable, growing, and have solid balance sheets. In recent months, the strategy was more exposed to the Quality factor compared with its Morningstar Category peers as well. The managers have also tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. In addition, this strategy has exhibited a tilt toward higher-volatility stocks in these years, meaning companies that have a higher historical standard deviation of returns compared with peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in basic materials and healthcare relative to the category average by 5.9 and 5.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 5.6 and 3.2 percentage points of assets, respectively. The portfolio has 258 holdings and invests 27.1% of assets in its top 10 holdings, similar to the category average. And finally, in terms of portfolio turnover, looking at year-over-year movements, 91% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Below Average

Process

Janus Henderson’s team receives An Average People Pillar rating. The number one contributor to the rating is the stability of the management team. Specifically, the fund has not seen a manager change in the last six years. This fund tracks an index, which also improves its People rating. Historical data, like Morningstar's Active/Passive Barometer, shows that index funds have generally outperformed their active counterparts, especially over longer time periods. Lastly, the rating is limited by the parent firm's five-year retention rate of 69%, which suggests it could do more to retain its portfolio managers.

Average

People

Under new leadership, Janus Henderson Investors is in the early paces of a fortified vision. It maintains an Average Parent rating.

Ali Dibadj took the CEO reins in June 2022 when the public company's board made a leadership change after the firm, formed by the 2017 merger of Janus Capital and Henderson Group, stagnated. Dibadj, who has a background in investment management (most recently as AllianceBernstein's strategy head and CFO), has energetically engaged the organization to develop his strategic road map: protect and grow the core business; amplify existing capabilities; and diversify into new areas, which could include acquisitions. While these ideas aren't unique in today's asset-management industry or brand new to Janus Henderson—its former CEO espoused similar ones—Dibadj added his stamp by refreshing the firm's executive committee and investment team leadership. This has also included the basic but necessary addition of scorecards to measure progress on strategic initiatives that include new vehicles like exchange-traded funds and separate accounts, among other things.

Time will tell if Dibadj and team can deliver. The firm's equity analysts continue to turn over, but portfolio managers have executed their strategies consistently, and some key figures returned. In 2023's first quarter, the firm saw net inflows for the first time since the merger—a sign of a nascent turnaround.

Parent

Janus Henderson Small/Mid Cap Growth Alpha ETF

JSMD tracks an index of US small- and mid-cap stocks with strong fundamental measures of growth, profitability and capital efficiency. Weighting relies on the actively-managed Janus Triton Fund.

A smart beta exchange traded fund, the Janus Henderson Small/Mid Cap Growth Alpha ETF (JSMD) debuted on 02/23/2016, and offers broad exposure to the Style Box - Small Cap Growth category of the market.

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