Janus's First-Quarter Earnings Decline 21% on Market Losses

  • Assets under management fall to $191.3 billion as of March 31
  • Clients added $600 million to exchange-traded products

Janus Capital Group Inc. reported a 21 percent drop in first-quarter earnings as market losses early in the quarter took a toll on assets under management.

Net income fell to $33.8 million, or 19 cents a share, from $43 million, or 23 cents, in the year-earlier period, the Denver-based company said Tuesday in a statement.

Janus, led by Chief Executive Officer Richard M. Weil, 52, joins other fund companies posting decreasing profits after stock market losses in January and early February eroded assets and fees for overseeing them. BlackRock Inc., the world’s largest money manager, this month reported a 20 percent slide in first-quarter net income as market swings cut into fee revenue and the firm cut jobs.

Assets at Janus declined to $191.3 billion at the end of the quarter from $192.3 billion as of Dec. 31, reflecting market losses of $1.3 billion, partly offset by net inflows of $300 million that were driven by deposits to exchange-traded products. Long-term funds had $300 million in redemptions while the mostly short-term ETPs took in a net $600 million.

The company’s operating margin narrowed as expenses declined only 1 percent compared with a 5 percent drop in revenue, Chris Harris, an analyst with Wells Fargo & Co., wrote in a note Tuesday, prompting him to reduce his earnings forecast for this year and next.

“We believe JNS will not be able to expand its operating margin in 2016,” Harris said in the note, referring to the ticker under which the stock trades.

Smith, Chang

The shares fell 1.5 percent in New York trading, paring gains this year to 8 percent. That compares with an increase of 1.1 percent for Standard & Poor’s 19-member index of asset managers and custody banks this year.

Weil put Janus in the spotlight by hiring Bill Gross in 2014 and diversifying into new products and international markets as he seeks to distinguish the company from other active fund managers. While the Janus Global Unconstrained Bond Fund started this year with its best quarter since Gross took over management, it hasn’t attracted money on a large enough scale to alter the firm’s flows. More than half of the unconstrained fund’s $1.28 billion as of March 31 was Gross’s personal money.

Gibson Smith, the executive who drove much of the expansion of the Janus bond business in recent years, left at the end of the first quarter, which could lead the company to “potentially see institutional redemptions in fixed income,” Daniel Fannon, an analyst with Jefferies Group LLC, wrote in an April 11 note.

Janus promoted Enrique Chang, previously chief investment officer of equities and asset allocation, to head of investments effective on April 1.

The firm raised its dividend to 11 cents per share from 9 cents to be paid on May 20 for shareholders of record as of May 9, according to Tuesday’s statement.

Janus repurchased 2.5 million shares for $32.6 million during the first quarter, the company said in its earnings statement.

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