Expect a shake-up among mutual fund front-runners this year, as poor performers rebound, and interest rates level off.
Bloomberg columnist Chet Currier picks Janus Funds, a perennial poor performer in recent years, as a fund complex likely to attract new attention in 2006. With new management, the Denver-based shop seems to have won back investors' faith. In fact, investors yanked less capital out of Janus funds in October 2005 than any of the preceding 33 months.
Perhaps that's because Janus funds' returns have improved of late. In the past five calendar years, Janus' 44 U.S. stock and bond funds have yielded a mere 1% return, consistently underperforming the 4.7% yield on all long-term funds. But last year, on average, Janus' funds gained 10.3%, compared to the industry-wide 6.4% average. In the past three years, Janus funds have bested the benchmark, in fact, gaining 16.4%, compared to 13.8%.
Meanwhile, on Friday, Banc of America Securities changed its rating on Janus Capital Group from "sell" to "buy," and forecasted earnings of up to 33% per share over the next five years. BoA also ratcheted up the target share price from $14 to $23 per share, an increase of 64%, according to Reuters.
BoA likewise improved its ratings for Legg Mason Inc. of Baltimore, Md., from "neutral" to "buy," raising the price per share target by $37 to $147. Meanwhile, BoA dropped its rating of Chicago-based Nuveen Investments from "buy" to "neutral," because the company's own 2007 estimates are 23 percent of projections for this year, and 8% higher than that of analysts.
Currier also predicts that Valley Forge, Pa.-based Vanguard Group could vanish from the number-one fund manager, in terms of assets under management, as American Funds, a Los Angeles shop, continues to reap assets. In 2004, Vanguard had approximately $69 billion more under management, but as of Nov. 2005, Vanguard, with $788 billion under management, had only $31 billion more.