Janus Launches Capital Protection Fund

Janus has launched what it says is the first U.S.-based capital protection mutual fund to offer daily liquidity with no set maturity date.   

Janus Protected Series – Growth aims to “improve the investor experience by balancing potential capital appreciation with a measure of downside protection.” The fund’s capital protection will be provided by BNP Paribas, one of the world’s largest banks with over $2.67 trillion in assets and a market capitalization of $93 billion. 

The fund, which was launched on May 4, 2011, is managed by Janus portfolio manager Jonathan Coleman. Coleman, who also serves as Co-Chief Investment Officer, Equities, of Janus Capital Management, believes the most compelling feature of this product is the degree of downside certainty that it will provide.  “Financial advisors have told us that their clients want to reinvest in the equity markets, but have concerns about significant equity market downturns,” said Coleman. “We believe this strategy, with its expected ability to protect on the downside, may be a solution for these investors to meet their financial goals.”  

According to the announcement, Janus Protected Series – Growth aims to balance capital appreciation and capital protection by actively allocating its assets between domestic large cap equities, cash and cash equivalents, U.S. Treasuries or other instruments that have the potential to reduce risk such as short index futures, assisted by BNP Paribas’ risk allocation methodology. Janus notes that the fund is designed to provide investors with a protected NAV of no less than 80% of the highest NAV ever achieved by each individual share class of the fund, reduced for dividends, distributions, extraordinary items and extraordinary expenses. If the NAV per share for any share class is less than the protected NAV, the fund would liquidate. 

When Janus Protected Series – Growth’s NAV is above its protected NAV, the fund’s equity exposure could be up to 100%. In the event that the fund’s NAV approaches its protected NAV, the equity exposure could be as low as 0%. As a result, the fund may lag in a rising market due to the re-allocation process, particularly following a period of market decline. The fund may also lag other similarly managed growth funds that do not pay a capital protection fee, according to the announcement. 

“We are very excited to partner with Janus to deliver to investors for the first time an open-ended product that combines Janus' capabilities in active management with our long-standing experience in sound and adaptive risk-management principles to preserve capital,” said Edward Speal, BNP Paribas’ Head of Global Equities and Commodity Derivatives for the Americas. “As a result, we are comfortable providing the fund with protection.”  

“BNP Paribas has been providing capital protection for European-based investment strategies for over 15 years,” said Coleman. “We believe this makes them the perfect partner for this innovative strategy.”  

The press release cautions that there is no guarantee that the investment techniques used by the fund’s portfolio manager and the risk allocation methodology employed by the capital protection provider will produce the desired results.