Helen Young Hayes' declaration last week she is leaving her position as managing director of investments at Janus Capital could disturb the ailing fund giant's attempt to remake itself from a growth shop in order to retain assets. It could also signal the end of an electrifying era for the firm.
While Janus has lost some key talent since the market turned on its aggressive investment style, other executives could follow in Hayes' footsteps. Word on the street is that several other higher-ups in major operating areas within the firm have explored employment opportunities elsewhere recently.
With Hayes retiring, Janus said it is in the market for a new chief investment officer, a role Hayes helped fill since Jim Craig walked away from his CIO position in 2000. Craig was the last person to hold the CIO title at Janus.
The retirement is one more major defection in a line of moves at the company in recent years, said Burton Greenwald, president of Philadelphia-based mutual fund consulting firm B.J. Greenwald & Associates. In February, the firm announced the departure of Warren Lammert, longtime manager of the Janus Mercury Fund. Last summer, Tom Bailey, then chief executive, president and founder of Janus, said he would step down. Tom Marsico, one of the best known Janus managers, left in 1997 to start his own firm.
"These were all the glory names that ran the wave when the company was riding high. I think [Hayes'] departure marks the end of an era," Greenwald said. "I think what is really happening is the management of Janus is putting structure in place in what had been a very entrepreneurial organization and it's just not as fun anymore. Hayes has made a ton of money over the years. Now they've put in controls, and that was not a hallmark of Janus in its glory days."
Hayes, 40, will hand over the reigns of the Janus Worldwide Fund and Janus Overseas Fund in mid June, both funds she co-manages. While relinquishing control of day-to-day operations during the spring, she will stay with the firm for the remainder of 2003 to ensure a smooth transition, Janus said. Laurence Chang, co-portfolio manager of Janus Worldwide Fund, and Brent Lynn, co-portfolio manager of Janus Overseas Fund, will assume leading investment management roles upon Hayes move.
Chang has his work cut out for him because Hayes' Janus Worldwide fund, which had done particularly well in good times, made its debut on Doug Fabian's lemon list in the first quarter of this year as the No. 1 worst-performing fund. It total asset value has dropped 73.5% to $31 billion in less than three years, according to Fabian.
Blair Johnson, a Janus spokesman, said that Hayes has characterized her retirement as a "lifestyle change" and said that she is leaving the asset management business. She has been in the industry for 19 years and wanted more time for her personal life, he said. She has been at Janus since 1987.
"I realize that the timing of my retirement may seem unexpected, given the fact that we may be in the final chapters of one of the most challenging market environments in history," Hayes wrote in a letter to shareholders. However, she said she has worked closely with the two managers poised to lead the funds she co-manages and it is "the right time for Janus to bring in a single-purpose chief of investments."
Things have been ugly at Janus for a while, as the shaken fund giant was mired in a protracted battle with its parent company Stilwell Financial, which it eventually consumed last year. Additionally, the firm has been hemorrhaging cash as outflows have been slipping away. The fund took in $39.7 billion in 2000, but it was downhill from there. In 2001, Janus saw net outflows of $11.9 billion, and $14.2 billion in 2002, according to Financial Research Corp. Through the first two months of the year Janus had outflows of $1.5 billion, and today it has $132.7 billion of assets under management.
The turnover of senior management at Janus is not surprising to some in the executive recruitment business. At fund firms in general, executives are realizing that the days of higher compensation and more cash in their pockets that came hand in hand with the wild running of the bulls are over, according to one executive recruiter who asked to have their name withheld. It's not like Pamplona anymore on Wall Street.
The recruiter said execs are realizing they will have to work a lot harder in the next 10 years and will rarely be able to sniff the kind of compensation they received in the heyday of the bulls. And it's not just Janus, the source said, noting that several Fidelity managers left to start their own hedge funds after making piles of dough.
In fact, excluding stock options and other compensation, many mutual fund executives' total compensation packages have decreased significantly, according to a report last week. Only companies with a concentration on fixed income, which has held up well during the market, have bucked the trend.
Janus took away bonuses for many of its executives, pushing down total salaries for a number of key personnel by as much as 28%.
"We're looking for someone who has great experience and strong leadership skills, and obviously one of our priorities is to broaden our product environment," Janus' Johnson said. "We're known for our growth funds, but now we have some risk-managed equities." In January, the firm launched seven new value and risk-managed equity funds to complement its growth-oriented lineup.
While those outside the firm don't expect the new CIO to change the course of the company's overall strategy, they do expect someone with a more stringent investment style to come on board. Greenwald anticipates Janus will hire a CIO with experience in a large, structured investment organization with the know-how to handle a large staff.
Jeff Keil, vice president of the Global Fiduciary Review at Lipper in New York, said he expects Janus' search to be extensive. "My sense is that there are pretty big shoes to fill, and Janus will have to pony up a nice sum of money," Keil said, adding the firm has a very distinctive culture and finding someone with the right demeanor is crucial.
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