TOL - 10th Apr, 2026
David Elms on how market mayhem is again making the case for multi-strategy
Janus Henderson's head of diversified alternatives says global uncertainty has created an "opportunity-rich environment" for multi-strategy.
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This interview was filmed on Friday 27 March 2026.
Investing beta is an interesting concept. When times are good, investors are often unsatisfied with market-matching returns and chase higher beta assets, but are then unsatisfied in a downturn when those same high beta investments reverse more than the market.
It means there's a clear role to play for low beta, low correlation strategies that can perform regardless of market conditions, says David Elms, Head of Diversified Alternatives at Janus Henderson.
"It's not important when everything's going up. People want more beta and for all of their investments to join that party. But the mood changes when markets turn."
It's fair to say the mood is currently changing, as the unfolding conflict in the Middle East throws markets and the global economy into further uncertainty.
But that uncertainty is often a boon for multi-strategy investors, says Elms, as volatility and divergence open up new avenues for market neutral approaches.
"It's an opportunity-rich environment for multi-strategy," says Elms. "The backdrop of what's going on in Iran, equity markets starting to sell off, interest rates going higher, are where investors look for more neutral exposures like multi-strategy to come into the limelight and contribute to their portfolios."
The Janus Henderson Global Multi-Strategy Fund employs a number of distinct strategies designed to offer positive absolute returns as well as low correlation to global equities and other asset classes.
The strategies are Convertible Arbitrage, Event-Driven, Price Pressure, Risk Transfer, Equity Market Neutral, Fixed Income, Currency and Commodity Relative Value (FICC RV) and a top-down portfolio protection strategy, which between them stretch across assets classes including bonds, currency, equities and commodities.
In this interview, he explains where Janus Henderson have been seeing the notable risks and opportunities across a number of the fund's strategies, and how investors can try to protect their portfolios in the face of ongoing uncertainty.
Equities
The fund's Risk Transfer strategy has also endured a difficult time in equity repo markets since 2024 as bank balance sheets tightened, but the situation is now improving, says Elms.
"There's a proliferation of products where people supply balance sheet to banks and funding conditions are better."
Banking deregulation, especially in the US, is also helping to increase available capital. But it's on the Risk Transfer strategy where Elms is seeing the opportunities.
"One of the things that we're really interested in risk transfer is taking the other side of a very popular strategy where so much capital has come into it, it's distorted pricing," he says.
"You want to find supplier demand imbalances and take the other side of it because supply-demand imbalances move prices around and create the potential for advantage."
Specifically, it's a reversal in dispersion across equities that is now working for the fund.
"The Magnificent Seven had created the potential for very low correlation. But now that we move back into a more macro environment, stocks are co-moving together and dispersion is difficult. For us, being able to take a bet that stocks will be more correlated - reversing that dispersion bet - is starting to pay off for us."
Credit
Private credit markets are again attracting attention, says Elms, as investors are on high alert for any signs of structural weakness in the sector.
"Private credit is in the spotlight as something where liquidity is an issue and the quality of the underlying loans is an issue," he says.
It's why the fund's Convertible Arbitrage strategy, which finds mispricings in convertible bonds, is taking a cautious approach.
"The first thing you want to do in convertibles is ensure that you're paying defence effectively," says Elms. "Are you taking on too much credit risk? Are you well diversified?"
"Our approach is to hedge out credit risk in general. It's hard to do name by name. You've got to take some exposure, but you can hedge macro credit risk. You can buy index protection."
The bottom line is getting the defensive side of things right when conditions are tough.
"We're finding that environments like this, just like COVID, where convertibles really struggled, is where you want to make sure that that defensive aspect of your portfolio is working."
But there is still demand in the market, with convertible issuance the highest in five years, driven, says Elms, in large part by the AI supercycle.
"On the other side, companies need capital," says Elms. "The AI buildout - the infrastructure, the data centres and so on - is one of the big sources of companies coming to the convertible market for capital, and this creates opportunities for us."
Portfolio protection
Portfolio protection plays a crucial role in Janus Henderson's multi-strategy approach, helping the rest of the fund's strategies to weather shorter-term stresses while also driving uncorrelated returns at the same time.
Regular volatility has been one of the key drivers in that regard recently, says Elms.
"One of our best strategies over the last 18 months is systematic long volatility," he said. "That did super well over the Japanese carry trade unwind in August 2024 and did well during Liberation Day. The fact that there's so many people out there selling volatility at the moment means that it doesn't cost you much to run it."
Elms says there are echoes of 2022, where trend following paid dividends for the fund against a similarly-complex macro backdrop.
"The interesting component of the portfolio is the way that trend following can repeat what it did in 2022, when it did very well as equity markets declined and bond markets went lower as interest rates went higher."
"But as we currently see a rally in energy prices, equity prices rolling over and also fixed income markets rolling over as well, that's a really good environment for trend following if these things continue to happen."
As an example, Elms says the fund was early to rising oil prices last year, and has done very well as prices accelerated as a result of the conflict in the Middle East.
Commodities
Another area of opportunity Elms has identified outside of the fund's strategies is how investors can play the commodities cycle.
"People forget that commodities have a bust as well as a boom cycle, and you can give back a lot of that upside when things turn. I think back to the commodity boom into 2008 and then the long winter that came after that."
He has helped develop a two-pronged strategy that invests across both commodities and commodity equities to offer strong upside potential and strong downside protection across the cycle.
"The idea is that, in a bull market, these two components of the portfolio point in the same direction - they're both long and you effectively amplify the commodity equity investing with the trend following going long. But in a bear market, the drawdown on the commodity equity is offset by short positioning in the trend following, and you effectively go into a protect mode."
"So amplify and protect what enables the strategy to switch exposure on and off and give what we expect to be a less bumpy ride through the long term."
It's an example of the nuanced thinking that underpins a lot of the philosophy behind Janus Henderson's market neutral, multi-strategy approach.
But even market neutral strategies face challenges in challenging times as investors limit their exposure to risk and markets become more uncertain, says Elms.
"As risk goes up, risk managers tap portfolio managers on the shoulder and say, 'bring in the bet size'. You see unwind behaviour - people buy back shorts, liquidate longs to scale their portfolios down - and that creates a lot of noise around what's going on already in a complicated fundamental market."
"You're seeing the potential for economic conditions to change and the oil shock, the general geopolitical uncertainty, and then degrossing as well. It's going to be hard to see what's going to work and not work in market neutral investing until the dust settles."
But Elms believes the current landscape helps make the immediate and longer-term argument for more alternative-based approaches.
"We're going into an environment where investors genuinely care more about lower-correlated assets because there's somewhere to hide, as well as being something that could potentially be a source of return in tougher markets," he says. "So we're definitely getting more attention. And I think if this trend persists, then we'll see a lot more interest in alternatives in general."
Managed Fund
Janus Henderson Global Multi-Strategy Fund
Alternative Assets
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Tom is a Senior Investment Writer and Presenter at Livewire Markets, having worked as a writer and editor for 10 years, specialising in investing and personal finance.
He has previously worked at Finder, FourFourTwo and Man Of Many covering everything from film to football.
He has a Masters in Media Production and a Bachelor's in Journalism.
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Tom is a Senior Investment Writer and Presenter at Livewire Markets, having worked as a writer and editor for 10 years, specialising in investing and personal finance. He has previously worked at Finder, FourFourTwo and Man Of Many covering...
Expertise
Tom is a Senior Investment Writer and Presenter at Livewire Markets, having worked as a writer and editor for 10 years, specialising in investing and personal finance. He has previously worked at Finder, FourFourTwo and Man Of Many covering...
Expertise
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