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Can Janus' Core Funds Keep Up With its Ambition?

The firm is attempting to turn things around at its largest segment.

Greg Carlson, 04/02/2013

Known as a growth-investing powerhouse through the 1990s, Janus has endured ups and downs in the 13 years since the tech-media-and-telecom bubble burst in the early 2000s--an event that took the fund family’s superior track record and reputation down with it. To the firm's credit, it has strengthened its research organization and diversified its mutual fund lineup--something that can’t be said of all the growth-equity shops of the 90s.

But change has since been a near constant at Janus for more than a decade, and while evolution can be a good thing, it takes time for fund shops to establish a comfort level with investors as to organizational stability and investment excellence. While the firm has expanded its investment repertoire to include various equity styles, more fixed income, quantitative investing, and a slowly growing liquid-alternatives group, it is still most readily recognized as a growth-equity shop. That some of Janus' larger funds have been suffering over the past several years makes the firm as a whole a tough sell, despite encouraging performance and asset growth in its fixed-income funds.

The firm has also employed four CEOs (plus an interim one for eight months) in the 11 years since founder Tom Bailey stepped down from that position in June 2002. The funds' performance woes, both in the early 2000s and more recently among its equity offerings, and new strategic directions that came with changes at the top have resulted in spates of manager departures.

Nonetheless, Janus’ resilience as a firm has been impressive. If the firm can continue to build on its relatively strong 2012, along with some other positive developments, the firm could emerge a stronger fund company. Time will tell.

The Top Down
Janus’ latest chief executive, former PIMCO veteran Dick Weil, came aboard in early 2010 and presides over a firm that is still trying to find its way in many respects. Weil says investment excellence is his top priority, and he spends much time thinking about whether a Janus fund is fulfilling its promise to fundholders. Relationship excellence is a second priority--and that's quite important considering the firm previously closed off direct access to its retail funds for new investors and is selling the funds through advisor and institutional channels.

At the margins according to Weil, there are other initiatives. For example, Weil brought in an alternatives team in 2012, and Janus Diversified Alternatives JDATX launched that December. It’s clear he would like to launch more alternatives-based funds, but the Janus funds’ board of trustees has advised the firm to move at a measured pace in this area.

Meanwhile, a combination of sizable, consistent outflows from Janus’ equity funds and a drop in investment-advisor fees has put financial pressure on the firm overall. But it received a shot in the arm in 2012 when Japanese insurer Dai-chi agreed to take a 20% stake in the firm and invest more than $2 billion of its clients’ assets in Janus strategies. In addition to the immediate shoring up of the firm's balance sheet, this endeavor helps Janus in its efforts to expand internationally.

All of these moves could diversify Janus’ client base and ultimately stabilize cash flows for the funds, but it may take some time--and more importantly, continued strong performance--before Janus can stake its claim as a premier investment shop again.

Greg Carlson is a fund analyst with Morningstar.

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