Yahoo  Jun 29  Comment 
Jun.29 -- Janus Henderson Director of Research Carmel Wellso discusses the outlook for crude oil and the impact of trade tensions on markets with Bloomberg's Alix Steel and David Westin on "Bloomberg Daybreak: Americas."
New York Times  Jun 27  Comment 
The Supreme Court’s decision imperils public-sector unions. Whether they survive will be up to them.
New York Times  Jun 27  Comment 
The Supreme Court ruling weakens public unions, which have been crucial defenders of rights for queer people.
New York Times  Jun 27  Comment 
Workers are already fighting in right-to-work states. The Supreme Court ruling doesn’t have to spell death.
New York Times  Jun 27  Comment 
The only solution for labor, after the Supreme Court decision in Janus, is militant, confrontational action by workers, with or without union support.
Clusterstock  Jun 18  Comment 
Billionaire PIMCO founder Bill Gross allegedly used dead fish and prank smell sprays to make his ex-wife's life miserable following their divorce. The couple split in October after 31 years of marriage, with his ex getting their...
GenEng News  Jun 15  Comment 
Small molecular inhibitors of the Janus kinase (JAK) signaling pathway have been developed of the past several years to effectively treat a host of disorders, such as rheumatoid arthritis, Crohn’s disease, and even cancer. Yet now, new evidence...
MarketWatch  Jun 13  Comment 
Forecasters of doom are probably two years ahead of reality, says Carmel Wellso of Janus Henderson.
MedPage Today  Jun 7  Comment 
(MedPage Today) -- Health news and commentary from around the Web gathered by the MedPage Today staff


Janus Capital Group (NYSE: JNS) is a well known (if somewhat infamous) investment management company that largely focuses on investment in growth equity mutual funds. Janus provides investment research, advisory and investment services, and fund products to individual as well as institutional investors.

The firm is widely known within the financial community for its involvement in class action lawsuits pertaining to market timing throughout 2003. The firm has the further dubious distinction of having portfolios overweight in internet and technology related securities throughout 2000 and 2001, when the internet bubble burst and these types of stocks plummeted. Between capital losses and asset flight the company has experienced asset deterioration to the tune of 60% between 2000 and 2006.

While Janus is certainly down the company is far from out. Beginning in 2005 the company has taken measures to diversify its portfolio, increasing the amount of debt and value included in its various offerings. With the lapse of SEC restrictions on its publicity activities, Janus has begun a multimillion dollar advertising campaign in an effort to improve investor sentiment. Finally, the company has made major changes to its management team. Perhaps the new management will be able to put Janus back on the right track.

Contemporary Fund History

Since late 2000, Janus Capital has been seen significant attrition in its assets under management - 60% by 2006. The two major factors driving this attrition are Janus' focus on growth equities and the negative publicity generated by Janus' Market timing scandal in 2003. Stillwell Financial (NYSE: SV), the financial services holding firm, merged with its subsidiary, Denver-based Janus Capital Group Inc., on Jan. 1, 2003. The new company, Janus Capital Group (NYSE: JNS), owns Janus and Berger mutual funds

Problematic Investment Philosophy

Since its incorporation more than 35 years ago, Janus Capital Group’s funds have always been heavily weighted towards growth stocks. Consequently, the growth of assets managed by the fund is highly correlated with the growth of the market. During the internet boom of the 1990s, Janus’ assets under management grew from $47.7 billion in 1996 to $258.1 billion in 2000. However, due to the high correlation with the market, as growth equities started to drop in value throughout late 2000, the value of Janus' assets deteriorated rapidly.

Market Transaction Improprieties

In 2003, Janus admitted to allowing market timing transactions within its funds; long-term investors were swindled out of profits because of Janus’ release of those profits to hedge funds for kickbacks. These allegations on the firm resulted in more than $100 million in penalties, litigation fees, and restitution. In addition, Janus must maintain business with mandated restrictions on the fees their funds charge to both private and institutional investors. This scandal severely damaged Janus' reputation and contributed to the capital flight that began in 2000 with the market downturn.

Initiatives and Going Forward

After a rocky start to the 21st century, Janus implemented several new initiatives starting in 2005 aimed at recapturing lost AUM:

  1. Under New Management: Janus has made changes to its management team. From 2005 to 2006, Janus promoted Gary Black from Chief Investment Officer to Chief Executive Officer and Director in addition to making other changes in the Chief Operation Officer, Managing Director of Institutional Services, Chief Financial Officer, General Counsel, and Senior Vice President and Treasurer executive positions.

  1. Diversifying Product Offerings: Janus has historically operated as primarily a growth fund investment management company. In order to diversify away from strategies that tie the performance of the market to that of the fund, Janus seeks to expand fund offerings to large capitalization value and fixed income funds. Janus has expressed interest in creating a large capitalization value fund subsidiary though acquisition while electing to develop a fixed income fund organically.
  2. Increased Advertising: Due to mandates associated with the market timing scandal, Janus was subject to severe restrictions on advertising until 2004. In 2004, however, with most of the restrictions lifted, Janus budgeted $23 million for advertisement for 2005, dedicating 80% of that amount to television spots.
  3. Evolving Compensation Structure: Janus has maintained inefficient compensation structures in the past, overlooking performance as a suitable index for incremental pay. Operating to suit the best needs of the firm and those of the firm’s clients, Janus has restructured its compensation plan. Shifting emphasis and indexation from revenues brought to the firm to performance indicators and awarding teamwork and consistency, Janus has created a compensation plan meant to reflect market realities.

Primary Business Segments

Janus Capital Group consists of two business segments: Investment Management and Printing and Fulfillment. Former generates all of Janus revenue. The latter is a value added service for existing clients.

Investment Management

The Investment Management segment provides asset and investment management services (such as research and advisory services) and administration to mutual funds, individuals, and institutional investors domestically and internationally. Investment Management can be further divided into two subsidiary companies: Janus Capital Management, LLC and Enhanced Investment Technologies. LLC.

Janus Capital Management

Using the top down method, or identifying equity investment opportunities first through performance research and second through equity specific performance within a given industry, Janus Capital Management and the Janus Fund have been serving investors in finding potentially lucrative equity investments for over 35 years. Janus Fund investment managers seek investment opportunities that they believe are selling at a discount, or are undervalued based on fundamental equity analysis, on the market. In addition to growth equity investment and research, the Janus Fund also invests in debt (corporate and federal paper, certificates of deposits, loans, et cetera), provides investment advice, portfolio maintenance, and a range of investment products based on the term (short, medium, or long) and risk tolerance of each client.

Enhanced Investment Technologies

Otherwise known as INTECH, Enhanced Investment Technologies. Using mathematical models to capitalize on the inherent volatility in equity (otherwise known as equity arbitrage), INTECH offers tailor-made investment services to institutional clients and endowments.

Distribution of Investment Management Services

To address the needs of potential Investment Management clients, Janus Capital Group has identified four different channels of product distribution: US Retail, US Intermediary, US Institutional, and International channels.

  • US Retail channel: primarily serves individual investors who access Janus’ primary fund, Janus Investment Fund, directly or through third party market platforms. Assets traveling though the US Retail channel totaled $49.0 billion or 29% of total assets under management for CY2006.
  • US Intermediary channel: primarily serves counter-parties within advice-driven markets such as asset managers, broker/dealers, third party administrators, and insurance companies. Assets traveling through the US Intermediary channel totaled $45.3 billion or 27% of total assets under management for CY 2006.
  • US Institutional channel: serves the needs of foundations, endowments, corporations and other institutional clients on a direct and consultative basis. Assets traveling through this channel are primarily originated through the requests from the mathematically based models offered by INTECH and totaled $62.1 billion or 37% of total assets under management for CY2006.
  • International channel: serves all of retail, intermediary, and institutional channel functions outside of the United States. Assets traveling through this channel totaled $11.0 billion or 7% of total assets under management for CY2006.

Investment Funds

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Asset Allocation Fund

Janus has begun to diversify its offerings of funds and move away from a strictly growth fund strategy. Janus advertises four classes of funds: Asset Allocation, Equity Funds, Bond Funds, and Money Market Funds. Asset Allocation funds invest not in single securities, but in mutual funds in an attempt to provide greater diversification opportunities. Equity Funds offered are further classified in terms of risk and return preferences. Funds within this classification include Growth, Specialty Growth, Risk-Managed, Value, and International. Bond Funds are classified further into Federal Tax-Exempt, Flexible, High Yield (Junk), and Short Term. Money Market Funds are further classified and were generally meant to provide fund members with high liquidity.

Provided below are the asset type allocations for each of the three most advertised funds within the Asset Allocation category: the Conservative, Moderate, and Growth Funds.

Conservative Moderate Growth
Large Cap. Stocks 17% 25% 33%
Mid/Small Cap. Stocks 11% 15% 19%
International Stocks 12% 20% 28%
Stocks 40% 60% 80%
Bonds & Money Market 60% 40% 20%

Printing and Fulfillment

The Printing and Fulfillment segment provides clients with digital and offset printing and fulfillment services. This includes high speed, high quality offset printing, brochures, and preprinted base stock and collateral pieces, offset printing. The aim of printing services is to provide clients with effectively personalized communications solutions through leading edge print on demand technology and applications.

Assets Under Management and the Internet Bubble

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Assets Under Management and Revenue

Prompted by equity growth investment strategies which lead to investment portfolios heavily weighted in internet and technology stocks, Janus Capital’s assets under management grew to an apex of $325 billion in the first quarter of 2000. Since then, the Janus Capital namesake has become synonymous with the expansion and eventual explosion of the Internet Bubble. In the first quarter of 2005, assets under management had declined to $132 billion, only 38% of its original value. Since then, Janus Capital has refreshed its senior management and is taking additional methods to diversity its portfolio to protect against poor returns and client investment attrition. In an effort to re-brand and re-capture assets lost to the Internet Bubble, Janus Capital Group allocated $23 million to its advertisement budget for FY2005, 80% of which was ear marked for television advertisement.

As the 2005 to 2006 year on year growth of assets under management from $135.2 billion to $156.7 billion (about 15%) indicate, the steps that management took to increase the assets under management have had some impact. This modest increase in assets under management is monumental for Janus; after five years of net outflows, the increase in capital indicates good faith in the Fund and a positive reaction to the efforts of new management to stimulate investment.

Business Drivers

SEC and Investment Regulation

The United States Securities and Exchange Commission (SEC) was formed in 1934 as an entity to govern the allocation of investment capital within United States capital and securities markets. With the intent create a more transparent investing environment for private and institutional investors, corporations are required to submit, on a systematic basis, various forms of financial, organizational, and management reports to the SEC. Beyond requiring financial health disclosure, the SEC also operates to investigate and intervene in cases of information allocation inefficiencies such as accounting, insider trading, and backdating regulation violations. Both of these issues present cost implications for Janus; while securities law and regulation become more stringent and as amendments are made to already existing legislation, Janus is obligated to fulfill the requirements set forth by policymakers, regardless of cost to the firm.

Janus funds are regulated based on time horizon (short, medium, long) and risk tolerance (low, moderate, high) inherent in the construct of each respective fund. For instance, 401(k) retirement plans that Janus offer to its clients may be subject to restrictions based on the weight of fund in equity, intrinsic volatility of equity within the fund, and institutional ratings or debt securities within the fund. Some of the specific legislation and Acts that Janus must adhere to include:

  • Investment Advisors Act (1940) – Janus’ financial advisors must be certified with the SEC to in order to provide financial advice to clients and must adhere to strict standards and regulations concerning accounting, fees charged, sales, recordkeeping, disclosure, operations, and governance.
  • The Investment Company Act (1940) – Through subsidiaries of Janus, employees act as advisers to mutual funds registered with the SEC and thus are subject to the regulations set forth to maintain the solvency of mutual funds.
  • Securities Exchange Act (1934) – Janus’ broker dealer subsidiaries are registered under the Financial Industry Regulatory Authority (FINRA), the market’s self regulatory organization. Under such registration, Janus is subject to broker dealer standards are regulations pertaining to accounting, disclosure, recordkeeping, and operations.
  • Employee Retirement Income Security Act, ERISA (1974) – As discussed in the example above, Janus is restricted by regulation of the Department of Labor and ERISA as to the type, number, and intrinsic risk of assets Janus may involve in a retirement plan’s transactions.

Health of Domestic and International Economy

The health of domestic and international economy impacts the earning capabilities of investment managers. In general, if the economy is expanding, this means that there is a higher volume of trade in addition to larger positions in all equity, debt, and securities. With standards of living and income rising, more people will want to invest their money in public and private resources. Specifically for Janus Capital Group, this will result in a growing amount of assets under management, ceterus paribus. With an increased number of investors in domestic and global markets, overall wealth will increase, catalyzing growth in the demand for Investment Management. Alternatively, if the domestic and/or the international economy were to recess, demand for all of these services would fall.

Interest Rates Sensitivity

Interest rates will affect Janus'--and any other company's-- involvement in investments or firms which issue corporate debt or equity. Changes in the interest rate will invariably change the fundamental values of both equity and debt, since the fundamental value of debt is determined by the time weighted average of payments discounted by current short or long interest rates. On the other hand, a driver of equity value is determined by the value of a firm today along with any projections in the future discounted by some factor over the risk free interest rate. Another way of looking at it is that higher interest rates encourage people to invest money in lower risk instruments(savings accounts, CDs) rather than stocks.

The interest rates are roughly set through the supply and demand of money in the economy, most of the time with help from the Federal Reserves’ monetary policy. The Investment Management segment of Janus Capital Group has exposure to interest rate changes within both the INTECH and primary Fund. As stated before, fundamental values as calculated by Janus' researchers and other outside researchers will be dependent on interest rate movement within the domestic and international economies.

Industry Competitors: Investment Management

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Assets Under Management Across Investment Management Industry

Although the Investment Management function that Janus provides is not fundamentally different from Investment Management services provided by large investment and money center banks such as Goldman Sachs, Bear Stearns, Merrill Lynch, JP Morgan Chase and Morgan Stanley, the primary intellectual and monetary focus for Janus is on Investment Management; as an entity independent of a regulatory parent organization, Janus is able to spend proportionally more resources in order to provide more diverse investment products and more comprehensive and investigated research. Although Investment Management is technically within the Financial Services industry, Janus represents a vertically integrated Investment Management firm. Other firms primarily dedicated to Investment Management that make up the competitive landscape for Janus Capital Group are T. Rowe Price Group, Vanguard Group, American Century, and Fidelity Investments.


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