The third quarter of 2025 witnessed a dynamic market environment characterized by a strong 'risk-on' sentiment, pushing equities to new highs, yet the Janus Henderson Mid-Cap Value Portfolio experienced an evaluative period that underscored the complexities of active management. While the broader market, as reflected by the Russell Midcap\u00ae Value Index, surged ahead with a 6.18% return, fueled by robust corporate earnings reports, increasing optimism for Federal Reserve interest rate reductions, and the pervasive excitement surrounding artificial intelligence, the portfolio delivered a more modest gross return of 3.60%.
A detailed analysis of the portfolio's performance reveals that specific sector allocations and stock-picking decisions played a crucial role in the differential. Investments within the financial and industrial sectors, regrettably, acted as a drag on relative performance, indicating challenges in these areas despite the generally buoyant market. Conversely, strategic selections within the consumer staples and healthcare sectors offered a counterbalance, providing positive contributions that partially mitigated the underperformance from other areas. This quarter's activity also saw an accelerating global expenditure on defense and military equipment, which significantly bolstered the performance of defense-related stocks, such as L3Harris, demonstrating the impact of geopolitical factors on market segments.
In navigating these market currents, our investment philosophy remains steadfastly anchored in identifying high-caliber companies. We consistently prioritize businesses characterized by sound management practices, healthy profitability, and conservative debt levels. Our objective is to uncover entities that, in our assessment, are currently undervalued by the market, presenting opportunities for future growth and appreciation. This disciplined approach ensures that, regardless of short-term market fluctuations or sector-specific headwinds, we continue to build a portfolio designed for long-term value creation.
Amidst a volatile global economy, a steadfast commitment to identifying and investing in fundamentally strong, undervalued companies provides a pathway to enduring financial success. The challenges of the past quarter serve as a valuable reminder of the importance of disciplined research and a long-term perspective in portfolio management, reinforcing the belief that strategic, quality-focused investing ultimately prevails.
