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Three years on: Janus Henderson Horizon Emerging Market Corporate Bond Fund

For professional investors only | For promotional purposes

Three years on

Performance

Assets under management (AUM)

US$97.8m in the fund at 29 December 2017

The Janus Henderson Horizon Emerging Market Corporate Bond Fund, which reached its three year anniversary in November 2017, o�ers a di�erentiated approach to accessing alpha opportunities within this extensive and dynamic asset class. The investment philosophy of the Janus Henderson Emerging Market (EM) Credit team, led by Steve Drew, is underpinned by the belief that the best opportunities come from strong fundamental credit analysis rather than relying on country views alone. With a keen focus on downside-protection, this approach has helped the fund deliver 1st percentile performance from launch to 29 December 2017 with signi�cantly lower volatility than its peers.*

5.76%Annualised return

(vs 4.34% peer group median*)

19.43%Since inception return

(vs 13.89% peer group median*)

-3.81%Maximum drawdown

(vs -6.23% peer group median*)

1.4 Annualised Sharpe ratio (vs 0.8 peer group median*)

Ratings**

*Source: Janus Henderson Investors, Morningstar, as at 29 December 2017. Peer group derived from the o�cial Morningstar peer group by adjusting for specialist funds (high yield / high grade / distressed debt). Performance is for the A share class, net of fees, priced at 4pm CET, in USD. Returns are annualised. Inception date is 5 November 2014. Past performance is not a guide to future performance.

**Ratings at 29 December 2017.

Source: Janus Henderson Investors, Morningstar as of 31 December 2017. Performance is for the A share class, net of fees. Benchmark is the JP Morgan Corporate Emerging Market Bond Index (CEMBI) Broad Diversi�ed. Figure in dotted box indicates outperformance for the period. Past performance is not a guide to future performance.

Source: Janus Henderson Investors, Morningstar as of 31 December 2017. Performance is for the A2 USD Acc share class. Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested.

S&P downgrades Brazil sovereign to BB+

Janus Henderson Horizon Emerging Market Corporate Bond Fund

JP Morgan Corporate Emerging Market Bond Index (CEMBI) Broad Diversi�ed

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1.66%

1.86%

1.33%

UW Russia(sanctions)

UW Mexico(NAFTA &elections)

UW Brazil (Lava-Jato)

Adding exposure in Mexico (post Trump)

Fitch downgrades Brazil sovereign to BB+

Performance drivers

Discrete annual performance01/01/2017 31/12/2017

01/01/2016 31/12/2016

01/01/2015 31/12/2015

Return (Cumulative) Return (Cumulative) Return (Cumulative)

Janus Henderson Horizon Emerging Market Corporate Bond Fund 8.32% 7.24% 3.74%

JPM Corporate EM Bond Index Broad Diversi�ed 7.96% 9.65% 1.30%

Institutional share class Retail share class

Team di�erentiators With the EM corporate debt asset class borne out of investing in sovereigns, many peers still rely primarily on country views. In contrast, the Janus Henderson EM Credit team believes:

• The best investment approach is a holistic one, with consideration of both micro and macro factors.

• It is important to be ‘index aware’, rather than index replicators. It is crucial to take an active role in managing downside risk and not be bound to any particular country, sector, issuer, duration or position weights.

• Before investing, it is essential to: form a solid fundamental view on the company; ensure a broad understanding of the technicals; assess market liquidity; be comfortable with geopolitical and country risks; and ensure the opportunity provides adequate compensation for the risk being taken. Environmental, Social, Governance (ESG) considerations are embedded throughout the process.

EM corporates – an evolving opportunity set 1) Strong growth potential

EM currently comprises:

- Most of the earth’s land mass

- Most of the earth’s population (c.6bn vs c.1bn people)

- More than 50% of its economy

- But less than 20% of its �nancial market

Source: Barclays Research, August 2017.

2) Extensive and diversi�ed

1,300 bonds from 52 countries across 12 sectors in the JP Morgan CEMBI Index.

The outstanding notional value of EM corporate debt is now more than double that of sovereign debt in hard currency terms*.

EM economies have grown in strength and now represent over 57% of global gross domestic product, on a purchasing power parity basis.

*Hard currency = external debt issued mostly in US dollars and increasingly in sterling and euros.

3) An investor-friendly asset class

More than 86% of issuers adhere to either International Financial Reporting Standards (IFRS) or US GAAP**making �nancial statement analysis more straightforward, and company comparisons across geographies easier. More than 80% of EM corporate issuers are publicly listed, which adds an important layer of transparency and corporate governance.

**Generally Accepted Accounting Principles developed by the Federal Accounting Standards Advisory Board of the United States.

4) High yield-like returns with investment grade-like volatility

The asset class is almost 60% investment grade (IG) yet has delivered high yield-like returns.

Total return of asset classes since start of benchmark (CEMBI) data (rebased to December 2001)

Past performance is not a guide to future performance.

Source: Thomson Reuters Datastream, JP Morgan, 31 December 2001 to 29 December 2017.

Note: US HY = BofA Merrill Lynch US High Yield Master, EM corp bond = JP Morgan CEMBI Broad Diversi�ed, EM Sovereign Bond = JP Morgan EMBI Global Diversi�ed, US investment grade corp = BofA Merrill Lynch US Corporate Master, US 10y Treasury = Merrill Lynch US 10y US Treasury futures. All indices in USD total return. Benchmark is the JP Morgan Corporate Emerging Market Bond Index (CEMBI) Broad Diversi�ed.

Source: Datastream, JP Morgan, as at 29 December 2017. Euro Corp IG: JP Morgan Maggie, US Corp IG: JP Morgan Juli ex EM, EM Corp IG: JP Morgan CEMBI Broad Diversi�ed IG, Euro HY: JP Morgan Euro HY, EM corps: JP Morgan CEMBI Broad Diversi�ed , US HY: JP Morgan HY, US Generic 5y Treasury and German generic 5y Bund

US 10yr Treasury

US Investment Grade US High Yield

EM Sovereign Bond EM Corporate Bond

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8.1%

7.4%

5.7%5.5%

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US HYEUR HYCEMBIJanus HendersonUS IGEUR IG

Max drawdown Volatility

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US HYEUR HYCEMBIJanus HendersonUS IGEUR IG

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US HYEUR HYCEMBIJanus HendersonUS IGEUR IG

Max drawdown Volatility

0%

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US HYEUR HYCEMBIJanus HendersonUS IGEUR IG

Contact usGeneral enquiries: +44 (0)207 818 4411Email: sales.support@janushenderson.comWebsite: janushenderson.com

Important InformationIssued in the UK by Janus Henderson Investors. Janus Henderson Investors is the name under which Janus Capital International Limited (reg no. 3594615), Henderson Global Investors Limited (reg. no. 906355), Henderson Investment Funds Limited (reg. no. 2678531), AlphaGen Capital Limited (reg. no. 962757), Henderson Equity Partners Limited (reg. no.2606646), (each incorporated and registered in England and Wales with registered office at 201 Bishopsgate, London EC2M 3AE) are authorised and regulated by the Financial Conduct Authority to provide investment products and services.

© 2017, Janus Henderson Investors. The name Janus Henderson Investors includes HGI Group Limited, Henderson Global Investors (Brand Management) Sarl and Janus International Holding LLC. H033321/0118

Outlook for EM corporates Steve Drew, Head of EM Fixed Income, and Jennifer James, Head of EM Credit Research, outline their expectations for 2018.

How do you think EM credit will perform in 2018?

We believe the trend of EM credit outperforming developed markets (DM) will remain intact and expect the asset class to deliver mid-single digit returns. The asset class has been sought after for income and stability and we expect this to continue for a number of years.

Which region or countries do you think offer the best risk/reward opportunities for 2018?

We expect Latin America and Sub-Saharan Africa to be the outperformer once again. However, with elections to come in Mexico and Brazil, our risk preference has shifted to an underweight on Mexico as we believe valuations are already pricing a positive and stable outcome. NAFTA negotiations will also weigh on expected Mexican returns and likely raise volatility. In Brazil, reforms are expected to proceed on track and the elections may prove to be another positive catalyst for markets. In our view, Brazil’s recovery should continue. Argentina remains our top pick, particularly the better quality provincial debt. We eagerly await more corporate issuance, as much-needed investment continues to proceed in the country.

What are your views on US interest rates and the US dollar (USD)?

The Federal Reserve (Fed) has only managed to raise rates five times since the global financial crisis. Expectations are for another three rate rises in 2018. We believe this is too much for the consumer to handle and therefore think only two more hikes will be seen. With terminal rates hitting 2%, we expect the Treasury curve to flatten further and lend a positive surprise to overall returns. Our USD view is somewhat mixed. We expect it to underperform developed markets, namely the euro, yen and sterling but be mixed against EM currencies. The carry available from EM FX should, in most cases, be enough to offset any relative weakness. Again, this should help general sentiment towards EM credit.

Where do you see commodities and oil in 2018?

We see 2018 being a positive year for oil and most key commodity markets, such as copper and iron ore. Demand is likely to remain stable but supply shortages should support prices. Again, this is a positive backdrop for EM credit, however, we recognise that commodity credits have already priced in a benign environment and offer little upside aside from carry.

What are the biggest risks to your views for next year?

The biggest risk to our views would be a return of price inflation, a Fed believing it is behind the curve and a corresponding flight to quality to the USD. Another risk that the market likes to focus on is China. A larger than expected slowdown in China, potentially driven by a repricing of the property market or a rise in bad debts, could impact EM and DM credit markets alike. However, our core view on China is that it will continue to manage its growth and leverage.

Will politics play a part in EM in 2018?

Politics and geopolitics will always play a part in emerging markets. During the last 2-3 years it has largely produced positive catalysts, with the resulting rare market sell-offs viewed as opportunities. Looking forward, it is likely to be more mixed and potentially lead to bouts of intermittent volatility as spreads are now tight relative to historical standards and expected future returns. This volatility will be an opportunity in some countries and sectors and we will look to take advantage.

How will the EM team seek to deliver alpha in 2018?

We will continue to focus on good companies that are undervalued simply for being in the wrong zip code. Our approach is bottom-up, fundamental investing with forensic investigation of balance sheets, cash flow statements and bond prospectuses to give us a competitive advantage on the often quoted but old style top-down approach to EM credit investing.

Janus Henderson Horizon Emerging Market Corporate Bond Fund

Steve Drew Head of EM Fixed Income

Jennifer James Head of EM Credit Research

This document is intended solely for the use of Non-US professionals and is not for general public distribution.

Past performance is not a guide to future performance. The value of an investment and the income from it can fall as well as rise and you may not get back the amount originally invested. Tax assumptions and reliefs depend upon an investor’s particular circumstances and may change if those circumstances or the law change.

Nothing in this document is intended to or should be construed as advice. This document is not a recommendation to sell or purchase any investment. It does not form part of any contract for the sale or purchase of any investment. We may record telephone calls for our mutual protection, to improve customer service and for regulatory record keeping purposes.