Capital Preservation in a Turbulent Market: Janus Henderson's Q2 2025 Strategic Allocation Playbook

In a world where low yields and high volatility have become the norm, capital preservation is no longer a passive endeavor—it demands a disciplined, adaptive approach. Janus Henderson's Global Multi-Asset Capital Preservation Managed Account exemplifies this ethos, leveraging Q2 2025 tactical shifts to navigate a landscape defined by trade tensions, inflationary pressures, and shifting policy dynamics. By blending strategic bottom-up valuation with dynamic top-down macro insights, the firm has crafted a framework that prioritizes downside protection while identifying emerging opportunities in alternative assets and structured credit.

The Q2 2025 Tactical Shift: A Disciplined Approach to Risk

The Janus Henderson Multi-Asset team's Q2 2025 report, “Finding Solid Footing in a World Shaken by Tariffs,” underscores a strategic pivot toward risk-aware portfolios. With global tariffs and geopolitical uncertainties amplifying market volatility, the firm has emphasized diversification across asset classes, including a mix of proprietary and non-proprietary equities, active and passive fixed income, and alternative investments. This approach is designed to spread risk, reduce the impact of market swings, and target varying levels of income and capital growth.

A key component of this strategy is the firm's focus on structured credit, particularly Collateralized Loan Obligations (CLOs) and asset-backed securities (ABS). These instruments, which offer floating-rate yields and active management opportunities, have become central to the firm's capital preservation playbook. For instance, AAA-rated CLOs currently yield 5.6%, a compelling return in a low-yield environment, while their floating-rate structure insulates investors from rising interest rate risks.

Alternative Assets: Diversification in Action

Janus Henderson's Q2 2025 allocations also highlight a nuanced embrace of alternative assets, including merger arbitrage and convertible bonds. These strategies are positioned to capitalize on macroeconomic tailwinds while mitigating downside risks.

• Merger Arbitrage: With corporate balance sheets strengthened and private equity dry powder at record levels, M&A activity is rebounding. Janus Henderson's focus on merger arbitrage allows it to exploit price discrepancies between acquiring and target companies, offering a hedge against equity market volatility.
• Convertible Bonds: In a “higher for longer” rate environment, convertible bonds provide a unique value proposition. They offer equity upside potential while maintaining fixed-income-like yields, making them ideal for investors seeking income in a low-yield world.

The firm's JABS Asset-Backed Securities ETF further exemplifies its alternative asset strategy. By targeting high-quality opportunities in the U.S. consumer lending market, JABS diversifies traditional fixed-income portfolios, reduces credit risk, and dampens duration exposure. This ETF's rigorous yield-per-unit-of-risk analysis ensures that investors are rewarded for taking on additional risk.

Downside Protection: The Structured Credit Edge

Structured credit allocations, such as CLOs and commercial mortgage-backed securities (CMBS), are critical to Janus Henderson's capital preservation strategy. These instruments are inherently resilient in volatile markets:

• CLOs: Floating-rate structures benefit from rising interest rates, while active management allows for selective credit exposure. In Q2 2025, the firm emphasized CLOs as a core holding, given their 5.6% yield and low default rates.
• CMBS: The office real estate sector's recovery has spurred CMBS outperformance. By focusing on properties with strong leasing fundamentals, Janus Henderson avoids overexposure to high-vacancy markets, ensuring risk-adjusted returns.

Navigating the Energy Sector: A Defensive Stance

While the firm's broader strategy leans into structured credit and alternatives, it adopts a defensive posture in sectors like energy. With oil prices volatile and long-term trends favoring electrification, Janus Henderson recommends a focus on integrated oil and midstream companies. These firms offer stable cash flows and lower volatility compared to pure-play exploration and production stocks.

Investment Advice: Balancing Risk and Opportunity

For investors seeking capital preservation in today's environment, Janus Henderson's Q2 2025 playbook offers a blueprint:
1. Diversify Across Asset Classes: Allocate to a mix of equities, fixed income, and alternatives to reduce correlation risks.
2. Prioritize Structured Credit: CLOs and ABS provide income and resilience, particularly in a higher-rate world.
3. Leverage Active Management: Merger arbitrage and convertible bonds require active oversight to capture alpha while managing downside risks.
4. Stay Defensive in Cyclical Sectors: In energy and utilities, favor companies with stable cash flows and low volatility.

Conclusion

Janus Henderson's Q2 2025 strategy reflects a disciplined, adaptive approach to capital preservation. By combining tactical shifts in structured credit and alternative assets with a focus on downside protection, the firm has positioned itself to navigate a high-volatility, low-yield world. For investors, the lesson is clear: in uncertain times, resilience is built through diversification, active management, and a willingness to embrace non-traditional opportunities. As markets continue to evolve, the ability to balance risk and reward will remain the cornerstone of successful capital preservation.