Richard Weil is learning how difficult it is to revive a mutual fund brand that has fallen from grace. Weil is chief executive officer of Janus Capital Group (JNS), a Denver-based money manager that rocketed to national prominence with the technology boom of the 1990s. After that came the dot-com crash, followed by a decade of internal turmoil, an exodus of talent, and the worst financial crisis since the Great Depression. “They came out of total obscurity in the mid-’90s,” says Burton Greenwald, a fund industry consultant. “They had an extraordinary equity run, and then it all fell apart.”
Weil, a former chief operating officer at Pimco, took charge in February 2010 and has drawn praise from Wall Street analysts, especially for his efforts to diversify the company’s fund offerings. Still, he hasn’t been able to fix the biggest problem: Janus’s clients keep heading for the exits. He declined to comment for this story.
At its peak, Janus was the fifth-biggest mutual fund firm in the U.S., with $325 billion in assets as of March 31, 2000, and the fastest-growing. By October of that year clients were withdrawing more than $1 billion a day, and assets fell to $130 billion in 2005. The company staged a rebound starting the next year as market-beating returns from managers including Scott Schoelzel of the Janus Twenty Fund (JNTFX) and David Corkins of the Janus fund began pulling in fresh cash from investors.
The momentum stalled in 2006 after CEO Gary Black tried to curb the independence of top fund managers by subjecting their investment decisions to more internal review and reducing their pay. In response, at least 15 managers left, including Schoelzel and Corkins. Black quit in 2009.
Enter Weil. With investors still showing a preference for bonds over stocks, he hired strategists and analysts to beef up Janus’s fixed-income team and started the Janus Global Bond Fund (JGBDX) in January 2011. Some of the company’s largest fixed-income funds have been performing well. Janus Balanced, which holds stocks and bonds, has beaten 91 percent of similar funds over the past five years. Janus Flexible Bond (JANFX) fund has topped 93 percent. Bonds now account for 17 percent of Janus’s total assets, up from 5 percent just after Weil took over.
In December, Weil rolled out the Janus Diversified Alternatives Funds (JDADX), the first in a series of planned funds designed to invest in multiple asset classes to reduce risk and price swings. He also struck a strategic partnership with Dai-ichi Life Insurance (8750:JP), Japan’s second-biggest life insurer, which took a 20 percent stake in Janus and agreed to sell its funds in Japan. “He’s made a lot of progress in terms of product development and distribution capabilities,” says Michael Kim, an analyst at Sandler O’Neill + Partners.
Yet Janus remains a stockpicking shop, and actively managed mutual funds aren’t drawing money the way they used to. The firm lost $4 billion to withdrawals in the first quarter even as the Standard & Poor’s 500-stock index jumped 10 percent. Assets are at $164 billion, about half their 2000 peak. Poor returns aren’t helping: Just five of Janus’s 28 equity funds with at least a three-year track record beat the S&P 500 over that period.
After underperforming other publicly traded money managers by 136 percentage points over the past 10 years, Janus’s stock may be a bargain, says John Miller, a portfolio manager at Ariel Investments, the second-biggest holder of Janus shares after Dai-ichi. “No matter what metric you use, this stock is cheap,” says Miller. “They still have a lot of talent, they have new products, and the market is rebounding. It’s not going to get worse.”