Janus Henderson Small Cap Value JSCVX will reopen most share classes to new investors effective April 17, 2023.

The reopening comes after the strategy’s asset base declined because of depreciation and modest outflows to roughly $2.7 billion currently from a recent peak of nearly $4 billion at year-end 2021.

The strategy remains one of the largest in the small-value Morningstar Category, so capacity will be worth monitoring closely. That said, the team running it has a history of prudent capacity management; the strategy closed to new investors in early 2020, when assets approached $4 billion.

The strategy retains its Above Average People and Average Process ratings as well as Morningstar Analyst Ratings of Bronze.

Hartford MidCap Owned First Republic Shares
Hartford MidCap’s HFMCX ownership of embattled regional bank First Republic FRC has added to year-to-date underperformance, but investors shouldn’t flee this otherwise solid offering. The fund keeps its Morningstar Analyst Rating of Silver for its six cheaper share classes and Bronze for its pricier three.

The fund owned First Republic at a 1.3% weighting as of Jan. 31, 2023—its latest holdings report. The stock had lost more than 70% of its value in 2023 as of March 16, with all of that drawdown coming in the first half of March after the failures of SVB Financial Group SIVB and two other regional banks. That industry sold off broadly, but losses were concentrated in the stocks of banks suffering the largest loss of deposits. In First Republic’s case, many of its mostly high-net-worth clients had pulled deposits in favor of better rates from Treasuries.

On March 16, a collection of large banks including JPMorgan Chase JPM announced they would deposit an aggregate $30 billion in First Republic. Still, its stock continued to fall on March 17, having lost about 25% as of midday.

Morningstar attribution shows other major losses for the year to date on Jazz Pharmaceuticals JAZZ and biotech United Therapeutics UTHR. Overall, the fund’s 2.5% year-to-date gain trails the Russell Midcap Growth Index by about 2.5 percentage points—about the size of the performance gap created after the regional banks issue arose.

Hartford declined to comment through a representative. While the First Republic position has hurt returns, its impact won’t sink this fund; its experienced team still can deliver strong relative performance over the long term.

JP Morgan Fund Owned Silicon Valley Bank
JPMorgan Large Cap Growth OLGAX owned SVB Financial Group SIVB prior to its collapse. The team liked the firm’s Silicon Valley footprint and used it to get exposure to innovation and technology through financials. The strategy’s modest 0.8% weight in that stock as of January 2023, its only investment in the regional bank industry, mitigated the damage. The strategy maintains its Morningstar Analyst Ratings of Bronze to Neutral, depending on fees.

Hartford Fund Joins the Morningstar 500
We are adding Hartford Schroders US MidCap Opportunities to the Morningstar 500.

Here’s Lena Tsymbaluk’s analysis.

Hartford Schroders U.S. MidCap Opportunities SMDVX benefits from a stable team and an established process. The People rating rises to Above Average from Average because manager Bob Kaynor has demonstrated he can implement the process consistently and to good effect. As a result, the Morningstar Analyst Rating gets an upgrade to Silver from Bronze for the cheaper share classes, while the remaining share classes go to Bronze from Neutral.

Kaynor has run this strategy as the sole manager since April 2019, when he took over from Jenny Jones. However, he has been part of the team since 2013 as director of research, and he has been involved in process enhancements, stock selection, and portfolio construction. Kaynor has 29 years of fundamental research and investment experience, with a substantial portion of his career spent investing in smaller-cap stocks. Kaynor is supported by a strong and experienced team, consisting of head of research Joanna Wald; five career sector analysts; a quantitative analyst, and an environmental, social, and governance analyst.

Kaynor has stayed true to the approach, and his execution has resulted in downside resilience relative to the respective indexes. Many portfolio biases have remained in place from the previous manager’s watch, such as limited exposure to biotechnology and an underweighting in REITs. The allocations between three buckets have also been stable under Kaynor. The only tweaks that Kaynor made upon taking over were reducing five to 10 holdings in the tail and bringing cash exposure down to 3%-5% from 7%-8%, although this hasn’t resulted in higher risk.

With less volatility than the index and a strong valuation discipline, the portfolio typically lags the market in very strong rallies. What the team terms its steady-Eddie allocation and cash exposure should provide a defensive ballast to the portfolio and help protect during down markets. Over Kaynor’s tenure from April 1, 2019, through the end of 2022, the I share class beat the Russell Midcap Index and its typical mid-cap blend Morningstar Category peer.

Overall, the process has been in place over the long term, and it is repeatable.