In the third quarter of 2025, the Janus Henderson Mid Cap Value Fund navigated a complex market landscape, delivering a 3.32% return against the Russell Midcap® Value Index's 6.18%. This period was characterized by mixed sector performance within the fund's portfolio. Despite facing headwinds from stock selection in certain areas, the fund's managers maintain a strong conviction in their established value investment philosophy, emphasizing resilience and adaptability amidst fluctuating market conditions.
The investment team meticulously manages the portfolio, strategically adjusting holdings to capitalize on overlooked opportunities while mitigating risks from overvalued segments. This proactive approach underscores their commitment to long-term financial objectives, even as market dynamics present both challenges and opportunities for discerning investors.
Quarterly Performance and Sector Contributions
During the third quarter of 2025, the Janus Henderson Mid Cap Value Fund recorded a return of 3.32%, falling short of the Russell Midcap® Value Index, which posted a 6.18% gain. This performance gap was primarily influenced by specific sector allocations and stock selections within the fund’s portfolio. Notably, stock-picking decisions in the financials and industrials sectors acted as a drag on the fund’s relative performance. These areas likely experienced market trends or company-specific challenges that did not align with the fund's value-oriented investment criteria, leading to underperformance compared to the broader index.
Conversely, the fund saw positive contributions from its stock selections in consumer staples and healthcare. These sectors demonstrated strength, with chosen companies performing well and partially offsetting the weaker results from financials and industrials. The contrasting performance across sectors highlights the complexities of active management, where individual investment decisions can significantly impact overall fund returns. The fund's strategy involves a disciplined approach to identifying value, even if it means short-term divergence from market benchmarks in certain segments.
Strategic Portfolio Management Amidst Market Shifts
Despite the short-term underperformance relative to its benchmark, the Janus Henderson Mid Cap Value Fund remains steadfast in its disciplined value investment approach, particularly in light of anticipated market volatility. The fund's managers emphasize a focus on high-quality value companies, a strategy that, while potentially hindering performance during "risk-on" rallies driven by lower-quality, high-beta stocks, is expected to provide stability and long-term gains. This commitment is evident in decisions regarding individual holdings, such as Kirby (KEX), where despite immediate weaknesses, the fund maintains its position based on expectations of a pricing rebound and long-term industry supply constraints, underscoring a patient and informed investment horizon.
Furthermore, the fund actively manages its exposure to sectors with elevated valuations, like artificial intelligence (AI) and defense. Following significant gains and expanded valuations in companies such as TER, LHX, and BWXT, the fund strategically trimmed these positions. The capital generated from these sales was then reallocated towards other undervalued, high-quality opportunities in sectors that are currently overlooked by the broader market. This dynamic reallocation strategy is central to the fund's ability to adapt to changing market conditions, protect against potential downturns, and uncover new sources of value, reinforcing confidence in its long-term growth potential.