Janus Henderson Small Cap Value Fund: Q3 2025 Commentary and Outlook

During the third quarter of 2025, the Janus Henderson Small Cap Value Fund navigated a mixed market environment characterized by sector rotation and selective strength among value-oriented small-cap names. Managers emphasize disciplined stock selection and active risk management as the primary drivers of relative performance.

Market backdrop and positioning: Macro uncertainty and varied investor appetite for cyclicals led to dispersion within the small-cap universe. The fund maintained a bias toward attractively valued companies with durable cash flows, conservative balance sheets, and visible earnings recovery potential. Portfolio construction balanced exposure across industrials, healthcare, financials, and selective consumer businesses, while keeping cash as a tactical reserve when opportunities were limited.

Performance drivers: Outperformance stemmed from high-conviction holdings in industrial and healthcare segments where company-specific improvements and operational leverage translated into rising profit expectations. Conversely, stock selection in certain energy-related and highly cyclical names weighed on relative returns as commodity-linked volatility and short-term demand concerns pressured those sectors.

Risk management and trading: The team continued to monitor liquidity and valuation dispersion closely, trimming positions that reached the team’s assessed fair value and reallocating to names with more attractive downside protection and upside potential. The managers also used cash and smaller positions to add flexibility, enabling quicker responses to idiosyncratic opportunities and risk-off episodes.

Engagement and fundamentals: Active engagement with company management remained a core element of the strategy. The fund prioritized issuers demonstrating margin improvement, debt reduction, or credible strategic shifts. Fundamental research and onsite diligence informed conviction levels and helped the team identify mispricings introduced by short-term market dislocations.

Outlook: Looking ahead, the managers expect continued volatility and selective opportunities within the small-cap value space. The strategy will remain focused on value discipline, earnings visibility, and balance-sheet resilience, with an emphasis on finding companies that offer asymmetric upside versus downside risk. While near-term performance may ebb and flow with macro shifts, the team believes a patient, research-driven approach positions the fund to capture long-term compounding potential in overlooked small-cap value names.