Brent Lynn turned the Janus Overseas Fund from one of the worst performers in its class into one of the best by raising the company's stake...
Brent Lynn turned the Janus Overseas Fund from one of the worst performers in its class into one of the best by raising the company’s stake in emerging markets like India and South Korea.
“That’s where we’re finding the most attractive growth, the most dynamic businesses and the most attractive valuations,” said Lynn, who has run the Overseas fund on his own for Denver-based Janus Capital Group since 2003.
Lynn has about 40 percent of the mutual fund’s $2.2 billion invested in companies in the so-called emerging economies. That compares with an average 5 to 10 percent for most competing international funds, said Gareth Lyons, an analyst at Morningstar, an industry research firm in Chicago.
The Janus Overseas Fund rose 27 percent in the past 12 months, as of July 19, ranking second after Saturna Investment Trust of 126 similarly managed funds tracked by Bloomberg. The fund remains an underperformer over the past five years, placing 78th of 90 funds, after declining at an annual rate of 6.3 percent.
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Lynn said that he invests in “the heavy hitters of their industries” — those with market values of more than $10 billion that are reporting higher profit growth than their rivals. His fund has stakes in about 80 companies.
The biggest holdings include India’s Reliance Industries, which runs the world’s No. 3 oil refinery; Brazil’s Cia Vale do Rio Doce, the world’s largest iron-ore producer; and Kookmin Bank, South Korea’s biggest lender.
Lynn has doubled the proportion of assets that the fund has in the emerging markets since he took over as sole manager from Helen Young Hayes two years ago. Hayes stepped down as investors withdrew money from Janus’ funds because of sub-par performance.
“It’s a big bet,” said Morningstar’s Lyons. “It’s going to make the fund more volatile, but often the further you stray from the crowd, the better chance you have to outperform the crowd.”
Since October, Lynn has bought more shares of Vale do Rio and Kookmin Bank. The emerging markets have been benefiting from economic growth and low interest rates, which have boosted consumer spending. India’s economy, for instance, expanded 6.8 percent in the first quarter, compared with 3.8 percent growth in the U.S. and 0.5 percent in the U.K.
The Morgan Stanley Capital International Emerging Markets Index, a measure of stocks in 26 countries, jumped 36 percent in the past year, more than doubling the 13 percent gain of the MSCI EAFE Index, a broader benchmark for international markets.
Companies in the emerging-markets index, which includes Eastern Europe, the Middle East, Africa, Asia and Latin America, probably will increase profits by an average of 12.5 percent this year, according to estimates from analysts at UBS.
Shares of Reliance Industries, the fund’s biggest holding, gained 57 percent in the past year. The company has reported eight straight quarters of record profit.
Its stock reached an all-time high last month after brothers Mukesh and Anil Ambani agreed to split ownership of the company to resolve a feud.
“Energy conglomerates in India have extremely exciting long-term double-digit growth prospects,” Lynn said.