An incline in People Pillar rating is the primary driver of Janus Henderson US Sustainable Eq ETF's upgrade to a Morningstar Medalist Rating of Neutral from Negative. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in quality exposure and an overweight in liquidity exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high liquidity exposure is rooted in stocks with higher trading volumes, lending managers more flexibility. This management team has a wealth of experience, but still gets 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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Encompass Health

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Janus Henderson US Sustainable Eq ETF earns a Below Average Process Pillar rating. 

The process benefits from its relatively concentrated portfolio, with its top 10 holdings accounting for 46% of assets. High-conviction picks court the risk of blowing up, but can also drive outperformance. However, the rating is held back by the parent firm's five-year retention rate of 70%, which suggests it could do more to hold onto its portfolio managers. The parent firm's five-year risk-adjusted success ratio of 54% also detracts from the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy tends to hold smaller, more undervalued companies compared with its average peer in the Large Growth Morningstar Category. Looking at additional factor exposure, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. Different from its historical appetite, however, the Quality factor was in line with the Morningstar Category average in recent months. Given the high trading volume of holdings, this strategy has been exposed to liquid assets during these years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to suffer from a significant loss. Compared with category peers, the strategy also had more exposure to the Liquidity factor in the most recent month. Additionally, this strategy has demonstrated a bias away from momentum stocks during these years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. In recent months, the strategy also had less Momentum factor exposure than 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 industrials and financial services relative to the category average by 13.0 and 8.4 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and communication services, underweight the average by 10.5 and 8.1 percentage points of assets, respectively. The portfolio is positioned across 42 holdings and is diversified among those holdings. In its most recent portfolio, 45.7% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 53.2% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 17% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

Janus Henderson US Sustainable Eq ETF earns an Average People Pillar rating. The main contributor to the rating is the combined average five-year excess return of each manager, which shows that the funds they manage have outperformed an average manager. Management team experience, which averages 14 years at this fund, also strengthens the rating. Lastly, the rating is limited by the parent firm's five-year retention rate of 70%, which suggests it could do more to keep its portfolio managers.


None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy's investors.

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 US Sustainable Equity ETF

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