Brinton Johns: My name is Brinton Johns,
Brad Slingerlend: my name is Brad Slingerlend
Denny Fish: and my name is Denny Fish and together we manage the Janus Global Technology strategy.
Denny Fish: We think this an important time to be invested actively versus passively.
Brad Slingerlend: Because of all the exciting elements that are happening right now, all of the disruption and all of the things that an active manager can take advantage of.
Denny Fish: We think a large number of the companies that make up, comprise the legacy portion of the index are threatened because if you look back through history, we’ve had three major platform shifts over the last 40 years. We had the mainframe, we had the client server and now we’ve had cloud and mobile and if you look through each of those transition periods, and you look at the companies that actually make the transition, generally there’s only one or two that actually successfully do it. We’re not invested in the names that we think are going to struggle through this transition.
Denny Fish: The way that the benchmarks are composed, they’re actually market cap weighted. And so effectively, because the winners of the last generation of technology, the client server era, as well as digital semiconductors, comprise a significant portion of the index, just because of where their market caps are today. What the index doesn’t do is predict what the market caps are going to be in the future. The winners of the past comprise more of the current index. Right now, somewhere in the neighborhood of 25% of the index is in companies that we would consider that are challenged from a legacy standpoint.
Brinton Johns: We take an ecosystem view. It takes a big team of analysts to do this. It’s a lot of work. We’re looking for the companies that are going to be those big benchmark names three, five years in the future.
Brad Slingerlend: One of the big focuses of the portfolio is downside protection and looking at not just the upside, but the downside and the risk of the portfolio. We addressed that very thoughtfully by actually building two portfolios in one. One half of the portfolio we call the resilience portfolio and the other half is the optionality portfolio. The resilience portfolio provides balance. It allows us to own higher growth companies in the optionality the portfolio. Then what we do is we look across each individual position size and try to balance the risk by position so a 5% to 10% position size of the portfolio should have roughly the same risk or potential negative impact to the portfolio as a .5% or a 1% position out in the tail.
Brinton Johns: We’re always excited about the Global Technology Fund. We’re particularly excited about it right now. We see a lot of money flowing into passive strategies and that appears very dangerous to us. The reason is, the top companies in that comprise about 25% of that total index and we’re very confident in our ability to pick the next generation of companies and outperform that passive index.