Janus Is Looking Forward
In Roman mythology, Janus is the two-faced god of beginnings and endings. It's an apropos image for the once-maligned Janus Capital Group (JNS ). With a new chief executive, a deeper research bench, and a revamped investment team, Janus is looking for a new beginning.
Early signs are encouraging. Nearly 70% of Janus' equity funds were in the top half of their category over a one-, three-, and five-year period ending in May, according to fund tracker Morningstar (MORN ). That's a dramatic jump from a year ago, when only 36% of Janus' stock funds landed in the top 50% of their peer groups for five years. Janus declined to comment before the release of its forthcoming earnings report.
Founded in the late 1960s, the Denver money manager had become the poster child for the industry's ills in recent years. Janus' high-growth style made it a darling during the the 1990s. But shareholders ran for the exits as performance plummeted in the three-year bear market that followed. That mass exodus continued when Janus got smacked by the mutual fund scandals of 2003. Janus settled with the Securities & Exchange Commission and other regulators in 2004 for $226 million without admitting or denying guilt. It was accused of letting big investors rapidly trade in and out of funds at the expense of other shareholders. All told, assets dropped from more than $330 billion at the top of the market in March, 2000, to $130 billion. Now they're up to $160 billion.
Gary Black, who took over as CEO in January, 2006, and his predecessor, Steven Scheid, who joined after the scandal, have worked to overhaul Janus' image, trying to return it to its roots as a boutique growth-stock manager. Under Black, who is also chief investment officer, the fund team has a new look. In February, Black tapped veteran David Corkins, who turned around Janus Mercury (JAMRX ), to run the firm's flagship Janus Fund (JANSX ). David Decker of Janus Contrarian and Jonathan Coleman of Janus Enterprise (JAENX ) were named co-chief investment officers of the domestic equity group.
Janus has also bulked up its research staff, adding seven analysts in the past two years. They cover 1,100 stocks, up from around 500 in 2001. Plus, manager compensation and fund fees are more closely linked with performance.
One of Janus' standout funds is the go-anywhere Janus Contrarian (JJVAX ), which can invest in domestic and foreign companies of all sizes. It ranks in the top 1% of large-cap blend funds over the past one, three, and five years. This $3.6 billion fund is up 18% in the past year, vs. 5% for the Standard & Poor's 500-stock index.
Despite some better numbers, Maui (Hawaii) financial planner Dennis De Stefano, who first started putting clients in Janus back in the 1980s, says he still largely avoids the firm. His complaint: management turnover. "We look for managers with a minimum of five years' tenure [on a fund]," says De Stefano, who adds that the only fund he's buying right now is Janus Mid Cap Value (JMCVX ), run by the team from the Berger funds (now part of Janus).
Indeed, money isn't exactly pouring into Janus funds. The company reported net inflows of $3.5 billion in the latest quarter, the third straight quarter of positive flows. Unfortunately, most of those dollars are going to INTECH, Janus' quantitative subsidiary. Take INTECH out of the mix, and the picture turns red. In the first quarter, Janus suffered net outflows of $500 million. Still, that's a big improvement over the same quarter in 2005, when investors pulled out some $3.9 billion. "They've made all the right moves," says consultant Jeff Keil of Keil Fiduciary Strategies. "The challenge is to fully repair the damage to the brand."
Wall Street is also screaming "show me the money." Shares of Janus Capital Group, which fell below $10 in 2002, are now at $17.50. But that's way off from its 2000 high of over $50. "Janus [asset flows] have gone from ugly to just bad," says analyst Matt Snowling of Friedman Billings Ramsey, who has an "underperform" rating on the money manager. "It needs to demonstrate that it can have good flows." Janus' much-improved fund performance is a beginning.
By Adrienne Carter