The strategy designed to thrive when markets behave like they are right now

Please note this interview was filmed on Wednesday 12 March, 2025.

As financial markets go, we are not in a normal environment. Asset prices are not close to their historical averages, concentration is the highest it has ever been, global debt is also at a record, and traditional relationships have, in many cases, broken down or reversed.

The extension of these observations is that traditional investing strategies that have worked in the past shouldn’t be expected to perform the same way in the future. With this in mind, I recently sat down with David Elms, who heads the Janus Henderson Global Multi-Strategy Fund. The Fund incorporates seven strategies in total, which are designed to take the world as it exists at any moment in time, and spread both alpha generation and risk across the strategies.

“The idea of multi-strategy investing is that you can take a broad range of investment strategies, allocate risk across them in such a way that you're not overly exposed to any one strategy as a point of failure”, says Elms.

Whilst fine in theory, as Elms readily admits, the key to successful multi-strategy investing revolves around identifying and managing the complexities of the world and how the strategies fit together.

“It's a challenge, but if you can get it right, that's what multi-strategy investing is all about”, says Elms.

In the attached interview, Elms shares how the strategies are fitting together right now, at a time when markets, assets, and investors, for that matter, are hardly behaving normally.

Key insights from Elms are summarised below but for the full experience, be sure to watch the video.

Market inefficiencies and investment opportunities

Elms emphasised that market inefficiencies create investment opportunities, particularly in strategies such as Trend Following and Price Pressure.

“In a theoretical economic world, there's new information and prices immediately adjust.

In the real world, prices adjust slowly as different people become convinced about the information,” he explained.

This delayed reaction allows trend-following strategies to capitalise on gradual price movements.

Another example Elms cited concerns capital flows, where large block trades require a discount to encourage participation. “This is the underpinning inefficiency that drives our Price Pressure strategy,” Elms noted.

Navigating the current market environment

When discussing today’s market conditions, Elms acknowledged the complexity and unpredictability of global events, particularly trade tensions and geopolitical risks.

#1 - Trade wars and inflation

On trade tensions, particularly those initiated by the Trump administration, Elms admitted that whilst it’s very hard to predict ultimate outcomes, shifting policy “creates noise, it creates volatility, and this creates opportunities.”

He suggested that while markets might ignore trade rhetoric for a while, the moment a policy stance is enforced, its real impact on the economy and security prices will be significant.

Elms also believes tariffs are inflationary, stating: “They’re going to increase the prices of imported goods and if the market is not fully baking in that inflation now, it will have to bake it in the future.”

This has implications for fixed income investments, as higher inflation typically leads to lower bond prices.

#2 - Equity market concentration

Elms pointed out that market concentration remains a key risk, especially with the dominance of the Magnificent Seven tech stocks. While recent market corrections have diversified performance somewhat, he cautioned that global equities remain disproportionately weighted toward the US, presenting both risks and opportunities.

“This creates opportunities that are good for what we do, but it also means that the market has risk embedded in it,” he observed.

#3 - Volatility

Looking ahead, Elms expects volatility to increase due to economic policy uncertainty, equity concentration, and geopolitical factors like the Ukraine conflict. “Sooner or later, geopolitical uncertainty translates to higher volatility,” he warned.

Portfolio positioning and strategy implementation

The Janus Henderson Global Multi-Strategy Fund is built around seven core strategies: six “risk-on” strategies that perform in normal conditions and one protection strategy designed for volatility spikes.

The fund's Equity Market Neutral Strategy is positioned to benefit from market concentration and increased dispersion in stock performance.

“We’ve spent some time setting that strategy up recently to have more exposure to individual names and less factor exposure,” Elms shared.

The Protection Strategy, which thrives in high-volatility environments, includes trend following and options-based hedging.

“It employs strategies like trend following that tend to do well if markets move a long way in one direction or another,” he said, adding that option-based approaches benefit when volatility spikes.

Elms highlighted the success of the Convertible Arbitrage Strategy, which has performed well in recent conditions.

“In hindsight, I wish we’d put more money to work in the strategy because it’s done well for us,” he admitted.

He attributed this to a shift in the investor base, with hedge funds replacing long-only investors, leading to greater price discipline and better valuation-driven opportunities.

Strategies for the road ahead

Elms sees two possible market scenarios unfolding in the next year:

1. A high-volatility environment: If volatility surges due to an economic downturn or geopolitical shocks, “our protection strategy is likely to stabilise returns,” he noted.
2. A more normal environment: In a scenario where asset prices stay within historical ranges, the risk transfer strategy could be the strongest performer. “It’s the one that we have the biggest risk allocation to right now,” he said, reflecting confidence in its prospects.

Should we get the high-volatility environment, Elms likes having the Protection Strategy as a backstop and nominates it to perform well. He likened the strategy to a Russian Matryoshka doll, with multiple layers designed to respond to different crises:

• Trend following, which benefits from persistent market moves (e.g., 2022 downturn).
• Volatility trading, using options to hedge sharp, unexpected shocks (e.g., COVID-19 crash, Fukushima disaster).
• Discretionary macro positioning, employing options to hedge concentrated risks while aligning with macroeconomic views.

By diversifying protection strategies in the same way they diversify risk-taking strategies, the fund remains robust against a variety of adverse market conditions.

Conclusion

Elms provided a comprehensive view of today’s investment landscape, highlighting market inefficiencies, concentration risks, inflation concerns, and the increasing likelihood of volatility.

The Janus Henderson Multi-Strategy Fund is positioned to navigate these challenges with a balanced approach of risk-on strategies and a well-structured protection component. 

Managed Fund

Janus Henderson Global Multi-Strategy Fund

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