The Janus Aspen INTECH U.S. Low Volatility Portfolio (Service Shares) underperformed the S&P 500 Index for the quarter. Led by riskier segments of the market, U.S. equity markets continued to soar in the fourth quarter and posted double-digit returns in 2016. The pro-cyclical financials sector, especially larger bank stocks, benefited from the expected rate increase as well as potential deregulation in the second half of the year, and was the strongest performing sector during the quarter. The Portfolio's underweight to mega cap financials was a significant detractor from relative performance during the quarter.
The Portfolio's average overweight to lower beta and lower volatility stocks detracted during the quarter as investor's risk appetite continued to increase and riskier segments led the market.
From a sector perspective, an average overweight allocation to the defensive utilities and consumer staples sectors also detracted from the Portfolio's relative performance during the quarter.
The Janus Aspen INTECH U.S. Low Volatility Portfolio aims to generate market-like returns over time with significantly lower return fluctuations. While some downside protection and a more consistent experience are expected over the long term, the tracking error, relative to the S&P 500 Index, is expected to be high.