Download Global Market Maturity Leads to Addition of New Fund: Janus

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JANUARY 2001
Global Market
Maturity Leads to
Addition of New Fund:
Janus Overseas
WORLDWIDE STOCK MARKET CAPITALIZATION
1980
26%
by: Rick Rodgers,
Director of Marketing and Client Services
48%
52%
74%
In the future, financial historians
will probably look back at the last
20 years of the stock market as one
of the most significant periods in its
history. Prior to the 1980s, most
individual investors were satisfied
with single-digit, conservative
investment returns. Beginning in the
80’s, the period labeled as “the
decade of greed,” conservative
investments, such as CDs and
money market accounts, began
paying double-digit returns near
20% annually. Investors grew
accustomed to these high returns
and began pouring money into
JAY
2000
United States
Foreign
stocks and stock mutual funds
stocks at unprecedented rates.
investors. Add this to corporations
expanding their markets globally to
become multi-nationals and you get
a true stock market evolution.
In the nineties the trend continued,
with even more of these historically
conservative investors becoming
willing to “taste” the market, in
pursuit of higher returns.
Technology enhanced the trading
and information capabilities of both
individual and institutional
SHOEMAKER’S
While all of these topics are pertinent to CCOERA’s evolution, it’s the
expanding foreign markets - that is
the relative topic for this article.
As you can see in the chart above,
continued on page 2
QUARTERLY
REPORT
A Shift in Style
Major US stock indexes stumbled through the worst year in many years. The Dow Jones
Industrial suffered its worst loss since 1981 (-4.85%), the S&P 500 its worst since 1977
(-9.10) and the NASDAQ its worst-ever (-39.29%). Another measurement of small-cap
stocks, the Russell 2000 lost 3.03% this year (and -6.91% for the quarter). Despite this
significant loss year, all these indices post at least double-digit returns over the last five
years, with the NASDAQ Composite posting a high 18.62%, and the Russell 2000 posting the
lowest of the bunch with a five-year return of 10.32%.
continued on page 2
Jay Shoemaker,
Executive Secretary
I N S I D E
Janus Overseas Fund Profile
T
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3-4
T
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4th Quarter 2001 Investment Results
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S
5
O
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NEW FOREIGN FUND: JANUS OVERSEAS
continued from cover
one of the most significant changes
during the past twenty years has
been the transformation from a
stock market dominated by domestic
(US) companies to a more globaloriented market. As a result, there
are now more investment opportunities outside the United States
than there are within our boundaries.
Historically, foreign investments
have been regarded as much more
aggressive and risky than domestic
stocks. But you would probably find
a large number of residents in foreign
countries that feel a lot more comfortable investing in Nintendo,
Phillips Electronics, Nokia, or the
like, over a U.S. dot-com stock.
One of the reasons for the “risky”
label assigned to foreign stock
funds is the broad array of stocks
contained in their portfolios,
everything from the larger, more
established multi-nationals, to the
unknowns from under-developed
nations. While the trend in domestic
mutual funds has been to focus on a
specific style of stock picking, such
as growth versus value, or companies
of a particular size (large-cap, midcap, small-cap), many foreign funds
have continued to mix styles and
capitalization sizes - until recently.
As the global market matures, a
greater variety of investment
opportunities have been presented
to us. We are now seeing foreign
funds with historically
blended approaches beginning
to target specific strategies,
much like their domestics
counterparts. As a result of
the changing environment
CCOERA has added Janus
Overseas to the investment
menu to offer participants
greater choice with respect
to foreign investing.
Compariso
Janus Over
NTT DoCoMo
Vodaphone A
China Mobile
Nokia
Telfonos de
Check Point
Furukawa Ele
Nortel Netwo
Banco Bibao
Tyco
For example, the American
AAdvantage International
Equity Fund (offered to
Fund Assets
CCOERA participants), has
Total Stocks
drifted from a blend-style to
an absolute “value-only”
approach, with a “limited-exposure”
policy to emerging markets.
“Value-only” refers to the price of
the stocks that the managers are
permitted to choose for the fund. A
Jay Shoemaker’s Quarterly Report: A Shift in Style
continued from cover
Each of you needs to continue your long-term
investing resolution because for most, retirement
investing is longer than even a 5-year horizon.
Besides investing for the long-term, CCOERA
Group Presentations also emphasize diversification.
This year is a classic example of the benefits of
diversification. Diversification means investing
in different asset classes, as well as different
types of investment styles. For example,
although the major stock market indices shown
above experienced losses, bonds had a very good
year. The Lehman Brothers Intermediate
Government/Corporate index had a positive
10.10% annual return for 2000. CCOERA's
bond option, PIMCO's Total Return produced an
above-average 11.81%.
Further diversification among equity investment
styles would also have mitigated losses.
The Russell 2000 Value index posted a 22.81%
return. CCOERA's small-cap value alternative,
Fidelity's Low-Priced Stock Fund nearly equaled
these returns with a one-year 18.83% return.
Another index, BARRA's large-cap value index
had a one-year return of 6.09%. CCOERA's
large-cap value fund, Davis NY Venture beat this
index with a 9.92% return. Our mid-cap value
alternative, MAS Mid-cap Value bettered Davis'
performance with a 11.59% return.
As you assess the performance of your account,
and the various CCOERA investment options, note
how in 2000 all value funds performed better
than growth funds, yet reviewing the 3-year
returns, you'll note that most growth funds hold
the edge. My point is this - diversify so that your
account is not over-exposed to any one investment style, and most important - invest for the
long-term.
page 2
number represents a growth style
of stock-picking, and a lower
number indicates a value style.
on of Top-Ten Holdings
American AAdvantage Intl. Equity
rseas
o
Airtouch
e
Japan
UK
China
Finland
Mexico
Mexico
Software
Isreal
ec
Japan
orks
Canada
o
Spain
US
Aventis
E.On AG ADR
Total Fina
Azko Nobel
ING Groep
Zurich Finan.
Unilever
BAE Systems
United Overseas
Telefonica
Services
Services
Services
Technology
Services
Technology
Industrials
Technology
Financials
Industrials
in Top-Ten Holdings
France
Germany
France
Netherlands
Netherlands
Switzerland
UK
UK
Singapore
Spain
Fund Assets in Top-Ten Holdings
36%
Total Stocks
111
value stock is one in which the
price of the company’s stock is low
as compared to the value of the
company’s tangible assets and its
earnings. On average, the stocks
currently owned by American
AAdvantage International Equity
fund are selling for prices that are
only 3.4 times the value of the
underlying company assets. This is
referred to as the “price-to-book
ratio” of the stock. In other words,
if you totaled the value of a particular
company’s assets and divided that
by the number of outstanding
shares of stock, you would
determine the “book value” of each
share. Let’s say the number derived
from this calculation is $10 per
Country Exposure Comparison
share. Meaning, for each share of
outstanding stock, the company has
$10 in assets. If investors are
currently willing to pay $34 for one
Value vs. Growth
Price/Book Ratio
American AAdvantage Intl.
Janus Overseas
15.7
13.1
29.8
In contrast, Janus Overseas has an
average price to book ratio of 13.1,
indicating a growth-style of stock
selection, making it a much more
aggressive fund.
American AAdvantage
United Kingdom
24%
Japan
15%
France
9%
Germany
7%
Netherlands
6%
Emerging Markets
24%
Emerging Markets
6%
Total Countries
24
Price/Earnings Ratio
3.4
share of this stock, it has a price to
book ratio of 3.4.
14%
11%
7%
6%
5%
21
20%
209
Janus Overseas
United Kingdom
Japan
United States
France
Canada
Total Countries
However, the price-to-earnings
ratio is a measure of the current
price of a company’s stock compared
to the earnings of that company
over the last twelve months. The
earnings are divided by the number
of outstanding shares of stock. In
this case, the average stock held in
Janus Overseas has a price/earnings
ratio of 29.8, meaning the average
stock owned by the fund is currently
trading for 29.8 times more than
the companies earned for each
outstanding share.
Additionally, the fund may invest a
greater portion of its assets in
emerging markets (companies
located in countries with newly
Health
Services
Energy
Industrials
Financials
Financials
Staples
Technology
Financials
Services
The other statistic
shown in the
chart above is
the “price-toearnings” ratio,
which is another
measure of the
fund’s preference
toward growth
or value stocks.
Again, the higher
developing stock markets)
Currently, Janus Overseas has 24%
of assets invested in emerging
markets, compared to only 6% in
American AAdvantage. Finally,
notice that over one-third of
Overseas’ assets are invested in
just 10 stocks, and you can see why
this fund is expected to be much
more volatile than American
AAdvantage Intl.
In summary, the addition of Janus
Overseas represents CCOERA’s
ongoing effort to provide a very
comprehensive, yet diverse array of
investment alternatives. As the
global markets continue to mature,
so will the investment menu offered
to participants.
page 3
JANUS OVERSEAS FUND
D E C E M B E R
PRIMARY
INVESTMENTS
SELECTION
STYLE
MANAGEMENT
STYLE
Foreign Stock
Large Growth
Active
INVESTMENT
3 1 , 2 0 0 0
Janus Overseas
Lower
F U N D
OBJECTIVE
S T R AT E G Y
The fund normally invests at least 65% of its total assets in
securities of issuers from at least five different countries,
excluding the U.S. However, it may at times invest in U.S.
issuers and it may invest all of its assets in fewer than five
countries. The fund may invest without limit in foreign equity and debt securities. The portfolio managers apply a
“bottom-up” approach in choosing investments. They look
for companies with earnings growth potential one at a time.
P
O
R
T
SECTOR
AS
F
O
L
I
O
WEIGHTINGS
OF
27.6%
Technology
25.6%
Industrial Cyclicals
8.7%
Consumer Durables
8.3%
Health
7.3%
Financials
5.4%
Energy
2.8%
Consumer Staples
1.5%
Retail
0.0%
Utilities
0.0%
R-squared
Beta
Alpha
Sharpe Ratio
Standard Deviation
Mean
I N F O R M AT I O N
Foreign Stock
Janus
$8.2 billion
May 1994
JAOSX
F U N D
M A N A G E M E N T
Lead Manager:
Tenure:
Education:
Helen Young-Hayes, CFA
6 Years
B.A., Yale University, 1984
Co-Manager:
I
V
E
R
S
Brent Lynn
I
F
I
P O R T F O L I O
AS
10/31/00
Services
M O D E R N
T H E O R Y
D
Higher
Fund Category:
Fund Family:
Assets:
Inception Date:
Ticker:
The fund seeks long-term capital appreciation by investing
in foreign securities.
INVESTMENT
RISK
C
A
T
I
O
N
C O M P O S I T I O N
OF
10/31/00
Bonds 0.3%
Cash 12.5%
U.S. Stocks
12.0%
Foreign Stock 75.2%
P O R T F O L I O
S TAT I S T I C S
S&P 500
24
0.78
11.85
Wil. 4500
64
0.81
13.61
3 Yr.
0.50
34.96
20.69
5 Yr.
0.51
28.32
21.78
O P E R A T I N G
E X P E N S E S
Management Fee
Other Expenses
Total Expense Ratio
0.65%
0.26%
0.91%
Foreign Stock Avg. Expense Ratio
1.68%
page 4
INVESTMENT PERFORMANCE RESULTS
For the Period Ending December 31, 2000
Total Return of the investment funds offered through:
CCOERA 401(a) Retirement Plan and CCOERA 457 Deferred Compensation Plan
Small-Cap
Fund
Name
4th Quarter
2000
3 Years
5 Years
10/1/00-12/31/00
1/1/00-12/31/00
1/1/98-12/31/00
1/1/96-12/31/00
1/1/91-12/31/00
-20.50%
-13.43%
16.71%
17.84%
N/A
Small-Cap Growth Mutual Fund Average
-19.03%
-12.39%
11.92%
12.48%
17.91%
1.34%
Fidelity Low-Priced Stock Fund
5.73%
18.83%
7.87%
15.08%
19.60%
15.76%
1.41%
13.90%
5.07%
11.90%
15.45%
17.46%
-17.64%
-7.57%
28.58%
27.57%
23.79%
30.80%
-18.59%
-8.14%
17.38%
16.83%
17.26%
28.97%
MAS Mid-Cap Value Fund
-2.06%
11.59%
15.91%
25.07%
N/A
19.84%
Mid-Cap Value Mutual Fund Average
3.64%
10.30%
10.13%
15.92%
16.02%
16.01%
-13.74%
-18.57%
20.69%
21.78%
N/A
28.32%
-4.63%
-15.92%
10.04%
9.35%
9.64%
18.62%
2.89%
-4.15%
10.77%
12.27%
N/A
14.94%
-4.63%
-15.92%
10.04%
9.35%
9.64%
18.62%
-6.56%
-6.81%
15.30%
18.11%
21.04%
16.85%
-16.49%
-15.87%
13.66%
17.58%
16.27%
20.52%
-9.40%
-9.31%
14.55%
16.27%
18.31%
18.63%
-8.14%
-2.23%
11.99%
15.82%
16.00%
18.14%
Davis NY Venture - Class A
1.13%
9.93%
14.04%
20.04%
20.19%
16.62%
Large-Cap Value Mutual Fund Average
2.34%
4.96%
9.11%
15.03%
15.45%
14.44%
-8.15%
-15.07%
11.47%
18.11%
N/A
17.92%
-5.18%
-4.12%
11.06%
16.39%
15.44%
14.98%
-7.22%
-8.22%
12.26%
18.49%
N/A
16.07%
-7.82%
-9.10%
12.26%
18.33%
17.46%
16.22%
4.62%
11.83%
6.80%
6.94%
N/A
3.97%
4.02%
10.34%
5.34%
5.54%
7.33%
3.66%
1.61%
6.28%
5.54%
5.47%
N/A
0.25%
1.63%
6.18%
5.43%
5.37%
4.93%
0.26%
1.67%
6.90%
7.10%
7.31%
7.41%
0.16%
1.58%
6.35%
6.22%
6.25%
6.57%
0.14%
Black Rock Small-Cap Growth
Small-Cap Value Mutual Fund Average
Mid-Cap
MAS Mid-Cap Growth Fund
Mid-Cap Growth Mutual Fund Average
Foreign
Stocks
Janus Overseas Fund
International Equity Mutual Fund Average
American AAdvantage Intl. Equity
International Equity Mutual Fund Average
Large-Cap
Fidelity Contrafund
Large-Cap Growth Mutual Fund Average
Fidelity Magellan Fund
General Equity Mutual Fund Average
Index
Domini Social Equity Index Fund
Core Equity Mutual Fund Average
PIMCo StocksPLUS S&P 500
Stable Money
Bonds
Value Market
S&P 500 Index
PIMCo Total Return Fund
Core Bond Mutual Fund Average
Fidelity Retirement Money Mkt.
90-Day Treasury Bill Average
CCOERA Book Value Fund
Ryan Labs GIC Index
Higher
CCOERA Pension Portfolios
Automatic Allocation Options
Pension Portfolio Five
Risk Tolerance: Very Aggressive
Pension Portfolio Four
RISK
Risk Tolerance: Aggressive
Pension Portfolio Three
Risk Tolerance: Moderate
Pension Portfolio Two
Lower
Risk Tolerance: Conservative
Pension Portfolio One
Risk Tolerance: Very Conservative
10 Years Standard
Deviation
34.79%
4th Quarter
2000
3 Years
5 Years
10/1/00-12/31/00
1/1/00-12/31/00
1/1/98-12/31/00
1/1/96-12/31/00
10 Years Standard
-3.98%
-3.61%
10.58%
13.94%
Deviation
14.33% 15.45%
10.05%
12.72%
13.17%
11.70%
8.33%
10.65%
11.67%
7.08%
9.00%
10.09%
10.47%
3.77%
7.55%
8.27%
8.38%
2.12%
1/1/91-12/31/00
Average Age Group: 45 & under
-2.31%
-0.86%
Average Age Group: 46 - 55
-0.16%
1.96%
Average Age Group: 56 - 65
1.92%
6.24%
Average Age Group: 66 - 75
1.53%
5.85%
Average Age Group: 75+
page 5
Source: InnoVest Portfolio Solutions, Inc.