The Highest-Rated Janus Fund That Owns (Mostly) Equities

For years, Morningstar’s analysts have been unexcited about most of Janus’ in-house diversified equity funds--as have investors, if years of significant net outflows are any indication. The performance of those funds has lately improved, and outflows have moderated, but we’re not sold quite yet. Of the 12 Janus equity funds that receive Morningstar Analyst Ratings, nine earn Neutrals while just three (

But moderate-allocation offering

Smith has built a sizable team since becoming Janus’ fixed-income CIO in mid-2007 and has generated fine total and risk-adjusted returns at the above three funds, largely through a mix of deft security selection (particularly among corporate bonds) and opportunistic adjustments of the funds’ weightings and yield-curve positioning in Treasuries. Janus Flexible Bond, which most closely resembles the bond portfolio of Janus Balanced, has handily beaten both its typical intermediate-term bond peer and the Barclays U.S. Aggregate Bond Index during Smith’s eight-year tenure there. Smith's team, which employs a bottom-up approach, is completely separate from that of Bill Gross, hired by Janus in 2014 to run a macro-oriented strategy out of Newport Beach, California.

Pinto, who has also comanaged Janus Balanced since 2005, hasn’t been nearly as successful as Smith at his stand-alone charges. Although he’s turned in good performance at separate accounts he’s managed since the late 1990s, Neutral-rated

The managers don’t usually veer too far from the fund’s neutral 60/40 stock/bond split. For example, its equity weighting was 57% at the end of June, according to Janus. But Pinto and Smith will make significant shifts on the rare occasions they believe conditions warrant it. In 2008, they allowed the fund’s equity stake to fall below 45% just as the financial crisis deepened. Partially as a result of that move, the fund lost a relatively modest 15% while its typical peer dropped 28%.

A final reason we’re more confident in this fund’s prospects than in most Janus funds’ is continuity. Pinto and Smith passed their 10th anniversary here three months ago. Only one of Janus’ equity fund managers has a longer tenure—Brent Lynn of

This fund may not look quite as good relative to peers if growth stocks underperform for an extended period, but it’s a solid core holding.

For a list of the open-end funds we cover, click here. For a list of the closed-end funds we cover, click here. For a list of the exchange-traded funds we cover, click here. For information on the Morningstar Analyst Ratings, click here.