Janus Grapples With Talent Losses
The firm's batting average on manager changes has been poor lately.
Janus has seen more than its share of peaks and valleys over time. To its credit, the firm consistently has come back from the depths. After a crash and burn in the 2000-02 bear market (due to heavy investments in tech and telecom) and the exposure of Janus' involvement in the 2003 market-timing scandal, the firm got back on its feet due to solid performance runs by managers David Corkins and Scott Schoelzel.
But then Janus suffered through a wave of exits: Corkins, along with promising young manager Minyoung Sohn, left in in late 2007 to start a new asset management firm. Schoelzel retired at the end of 2007.
The manager changes continued at a steady trickle. For example, David Decker left Janus Contrarian (JSVAX) last year, and just 10 days ago John Eisinger of Janus Global Select (JORNX) left. Some departures have been Janus' idea, but either way, it shows the firm still has work to do. All the while, performance, which had picked up nicely, has fallen off in the last couple of years.
Janus' talent losses have taken a toll. The departures in 2007 led to a number of new assignments at some of its most prominent funds. Jonathan Coleman replaced Corkins at Janus Fund , Ron Sachs took on Schoelzel's role at Janus Twenty and Janus Forty (JARTX), and Marc Pinto filled Sohn's shoes at Janus Growth & Income (JAGIX). While each manager had posted solid records at previous posts, these changes haven't worked out well. Coleman, Pinto, and Sachs lag 65%-80% of their large-growth peers during the 4.5-5 years they've managed their current charges--which are Janus' four largest domestic all-equity funds--and each fund trails its benchmark (the Russell 1000 Growth Index for all except Growth & Income, which competes with the S&P 500) by an annualized 2.5 to 4.5 percentage points.
A number of other manager changes at Janus' equity funds since then haven't yielded good results thus far, either. Here's a quick look at them:
Morningstar's Analyst Ratings reflect our concerns about the uncertain prospects of the above funds: Janus Fund, Janus Forty, Janus Global Select, Janus Growth & Income, Janus Twenty, and Janus Worldwide all earn Neutral ratings. (Morningstar hasn't yet published a rating for Janus Contrarian or Janus International Equity.)
Janus' analysts also have struggled during the latter part of the period from 2008- to mid-2012, particularly those who cover U.S. large caps. That's reflected in the weak 18-month performance of Janus Research (JAMRX), an analyst-run U.S. equity fund. Janus Global Research (JARFX) boasts a strong longer-term record, but its performance has moderated lately.
There have been a couple of changes at Janus that have worked out or look quite promising, but they're focused in what have long been relatively minor parts of the firm's lineup: small- and mid-cap U.S. equity funds.
The outcomes of Janus' manager changes raise questions about the strength of its bench, which may have gradually eroded from the departures of the last decade. And given the struggles of the managers who have been in place for nearly five years, that bench may be tested yet again.
It's clearly not all gloom and doom at the firm. In addition to the attractive options in small- and mid-cap equity and in fixed income, Brent Lynn at Janus Overseas (JAOSX) owns a fine long-term record--although shareholders can't be happy with the fund's brutal performance over the last 19 months due to a big bet on emerging markets. Meanwhile, the U.S. large-cap funds run by Coleman and Sachs have mounted a comeback thus far in 2012. But it will take time for Janus to restore confidence in what used to be its strongest areas.
Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.