Janus' sagging performance and Jim Craig's resignation early last month have precipitated a wave of rumors and speculation regarding the fate of the Denver-based firm.
Craig, who was chief investment officer and director of research, will leave the firm at the end of September to start a charitable foundation with his wife, the company announced Aug. 9.
The announcement runs contrary to Craig's insistence a little over a year ago that Janus' managers would not leave if its parent company, Kansas City Southern Industries of Kansas City, Mo., forced it to be spun off as part of Stilwell Financial. Janus executives had pressed Kansas City to be spun off separately, but failed and Janus is now part of a group that includes Berger Associates of Denver, Nelson Money Management PLC of Manchester, England and DST Systems of Kansas City, Mo.
"A situation where we don't get our way is not enough to cause any changes," Craig said at the time. (MFMN 7/19/99)
Craig's departure to start a private foundation is a ruse to cover his disgust with the spin-off and his protestations that his decision was not in response to the spin-off belies the general sentiment of other managers at Janus, said Roy Weitz, a financial advisor and publisher of FundAlarm.com, a website that tracks manager changes in the fund industry.
Craig was highly respected and well liked by the other managers at Janus, which makes losing him especially difficult for the firm, he said.
"[The managers] are human," Weitz said. "They aren't happy with the merger and they just lost their boss."
Janus' recent performance is another factor that could further sink morale at the firm, said Geoff Bobroff, president of Bobroff Consulting of East Greenwich, R.I., a mutual fund consulting firm. The firm's high-growth investment style has fallen out of favor with investors recently and unless the firm does something to turn its performance around, the added blow could prompt some managers to leave, he said.
If Berger Associates were merged with Janus, a possibility that has been rumored, that would strike a raw nerve with Janus' management and precipitate mass resignations, Weitz said.
Shelly Grice, a spokesperson for Janus, said she was aware of the rumor but that it was groundless.
The merger, however, would make good business sense and would allow Stilwell to get rid of Berger, which does not have Janus's brand recognition and has not taken off as a company, Weitz said.
Other analysts agree.
"[Stilwell] is the best soap opera in town," said Steven Eisman, managing director of CIBC Oppenheimer of New York, in a recent statement. "It's still a cheap stock, and something is going to happen to this company."
There are enough similarities between the two firms that a merger is conceivable, Bobroff said. The firms have similar distribution channels and both employ a growth-oriented investment strategy, he said.
Weitz predicted that within a year, Craig will follow Tom Marsico's footsteps and start his own firm, taking advantage of the growing discontent at Janus in order to recruit portfolio managers.
"I really think it's reasonable to believe that some Janus managers will join him," said Weitz. "He was well liked and I don't think the people are happy with the Stillwell thing."
Craig still has $75 million in Janus stock he can sell back to finance the startup of a firm, Weitz said.
"The analysts they have is a big selling point for Janus and Craig could probably have his pick of them," he said.
Weitz, who also runs a charitable foundation, says Craig will be occupied for "about 10 minutes a week" managing the foundation's money.
"What Craig says can basically be ignored," he said. "He's going to put the best spin on this as possible but you can ignore it. We can expect Jim Craig to wind up somewhere else within a year. He's 44 and unless he's willing to play golf for the rest of his life, he won't be happy."