Janus Outflows Rise to Most in a Year on Eve of Merger Dealby
Reports net redemptions in long-term holdings of $2.4 billion
CEO Weil says quarter was ‘frustrating’ for short-term results
Investors pulled the most money from Janus Capital Group Inc. in a year during the third quarter as they turned increasingly to lower-cost, passively run funds, a trend the asset manager is countering by merging with Henderson Group Plc.
Janus reported net redemptions in long-term holdings of $2.4 billion, the most since $3.3 billion in outflows in last year’s third quarter, according a statement Tuesday. The Denver-based firm, which announced Oct. 3 that it was combining with London-based Henderson to form a $320 billion money manager, has suffered redemptions in four of its last five quarters.
"This was a frustrating quarter for short-term results," Janus Chief Executive Officer Richard Weil said Tuesday in a conference call. "Neither the investment performance nor the flows were what I want or expect."
Firms that specialize in stock and bond picking have been losing market share to lower-cost indexers. U.S.-based actively managed funds saw clients pull $295 billion in the 12 months through September, while passively run funds benefited from deposits of $454 billion, according to Morningstar Inc.
Third quarter net income rose to $41.1 million, or 22 cents a share, from $19.9 million, or 10 cents, in the year-ago period, Janus said. Earnings after adjustments related to the Henderson deal were 24 cents a share, exceeding analysts’ estimates of 23 cents. Janus reported third quarter revenue of $258.9 million. Analysts expected $261.3 million.
Janus fell 2.7 percent on Tuesday to $13.56 as of 9:59 a.m. in New York. The shares were down 1.1 percent this year through yesterday, compared with a 14 percent loss for the 31-member Bloomberg index of large asset managers.
Assets at the firm rose to $198.9 billion as of Sept. 30 from $194.7 billion on June 30, driven by $6.7 billion in market appreciation. Janus reported outflows to its growth, global equity and fixed-income funds and those from the Intech unit, which uses mathematical strategies. The firm received inflows at the Perkins funds, which focus on value stock investing.
The fixed-income group had outflows of about $100 million during the quarter, even as the Janus Global Unconstrained Bond Fund run by Bill Gross had deposits of almost $100 million. Gross’s $1.59 billion fund returned 5.3 percent this year through Oct. 21, outperforming 64 percent of its Bloomberg peers. Its total return was 4.3 percent since Gross joined Janus in October 2014 after his acrimonious departure from Pacific Investment Management Co.
Gross’s fund is seeing "significant improvement" in client demand, Weil said on the conference call. Gross is "doing a very good job," he said. Asked about growth opportunities for the fund, Weil said Gross isn’t "personally motivated to trek around the world" to gather more client assets.