Fund spotlight: Janus Henderson UK Responsible Income

An interactive investor analyst offers a view on one of our ACE 40 funds.

The ACE 40 fund
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The Janus Henderson UK Responsible Income fund aims to provide an income with the potential for capital growth over the long term. It is benchmarked against the FTSE All-Share Index and sits within the Investment Association’s (IA) UK equity income sector.

Launched in May 1995, the fund has grown to a size of just over £300 million. The fund invests in UK companies of any size and avoids investing in companies the manager considers to have a negative impact on the development of a sustainable global economy.

Manager Andrew Jones uses bottom-up stock selection (focusing on the fundamentals of a business rather than the macroeconomic backdrop) with a strong valuation discipline to assess stocks on cash flow, dividend growth and yield within an environmental, social and governance (ESG) framework. Jones excludes stocks following Janus Henderson’s avoidance criteria, which covers issues on the environmental side such as fossil fuels, nuclear power and fur, as well as social issues such as gambling and human rights.

The fund aims to have a carbon footprint significantly less than that of the FTSE All-Share Index. 

The fund has been managed by the highly experienced Jones since the end of 2011. He is supported by the well-resourced wider team at Janus Henderson.

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What does it invest in?

The fund invests in a diverse portfolio of 66 holdings, made up primarily of UK companies of any size however the fund is mainly comprised of larger-cap companies. The fund is permitted to invest up to 20% in overseas companies, currently at 11%. In addition to this, the revenue exposure of the fund is relatively global resulting in 43% for the UK, 21% for North America, 19% for Europe ex UK and 13% for the emerging markets.

In terms of sector exposures, the fund is around a third exposed to financials, however this will typically include financial services companies and insurers as opposed to banks. Following this, the fund also has large exposure to consumer discretionary (15%), healthcare (13%), industrials (12%) and utilities (10%). As animal testing within medical companies is not part of the ethical exclusions, the fund can get exposure to medical technology and pharmaceutical companies.

Some of the largest holdings within the fund include AstraZeneca (LSE:AZN) (4.8%), a multinational pharmaceutical and biotechnology company that has recently been a key player in the fight against Covid-19 through the development of a vaccine, Schroders (LSE:SDR) (3%), a fund management business, and National Grid (NYSE:NGG) (2.9%), an energy company operating in the UK and the US.

How has it performed?

Since launch in 1995, and also since the manager took over at the end of 2011, the fund has delivered strong performance, outperforming the index and peers. Over five years, the fund has delivered 44% versus 37% for the benchmark and 34% for the IA UK Equity Income sector average.

Since the start of 2021, the fund is neck and neck with the benchmark, both of which have returned 11%. It is slightly behind the 12% return for the IA UK equity income sector average.

In terms of yield, the fund has been delivering a historic yield of 3.6% and aims to grow the income by 5% per year.

Source: Morningstar Total Return GBP

Source: Morningstar Total Return GBP

Why do we recommend it?

Janus Henderson UK Responsible Income fund features on interactive investor's ACE 40 list of ethical investments as a UK Equity Income, core recommendation. It also falls within the ACE ‘Considers’ category meaning the fund carefully considers a wide range of ESG issues and themes when balancing positive and negative factors. In addition, the fund is managed by a highly experienced manager and team, and the diversified exposure to UK stocks within a long-term, flexible and pragmatic investment process makes the fund capable of achieving outperformance in a variety of market conditions.

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This, along with the fund’s extensive ethical process with strong governance and sustainability standards as well as the portfolio having a low-carbon emissions score compared to the FTSE All-Share Index, allows investors to gain access to the UK market while being mindful of the environment.