DENVER - In a teleconference for securities analysts and shareholders from Janus Capital Management headquarters here last Thursday, executives of the sixth-largest equity manager in the U.S. mapped out their post-restructuring strategy.
Among the items on Janus' "To Do" list for the new year is broadening its mutual fund lineup with several new fund launches, leveraging its distribution capabilities and improving fund performance. Adopting a best-of-breed mantra is also on Janus' wish list for 2003.
Deliver the Goods'
No matter how good your marketing and distribution are, at the end of the day nothing is more important than performance, said Mark Whiston, Janus' current president of retail and institutional services and its CEO-elect. "You've got to deliver the goods," Whiston said.
As announced in September, on Jan. 1, 2003, Stilwell Financial will be melding all of its operations into one unified organization that will take on the Janus Capital moniker. Both Enhanced Investment Technologies (INTECH) and Bay Isle Financial, both formerly owned by Janus' sister company Berger Financial, will become direct investment subsidiaries of the new Janus.
In 2003, Janus will be pushing even further into the financial intermediary distribution channel, leaving the direct-to-investor channel in the dust. Five years ago, 95% of Janus' fund sales came from direct, no-load distribution, Whiston said. Today, the direct no-load channel accounts for a lesser 25% of Janus assets, with the intermediary channel accounting for more than 52% of assets, he added.
Still, Janus is currently the largest non-proprietary fund family offered in the no-transaction fee supermarkets of both Charles Schwab & Co. and Fidelity Investments. But most of the money that flooded into Janus in the late 1990s was from investors chasing hot returns, Whiston admitted in hindsight.
Go-Go Days Over
Janus will also be rounding out its fund product mix with several new value funds for which it has already filed registration. Assets will be managed by its new subsidiaries. Value investing is not an investment style that growth-focused Janus has embraced in the past.
"A narrowly focused fund family served investors nicely in the 1990s," Whiston said. But Janus now needs to add complementary investment disciplines, he said.
One myth is that Janus is a pure, aggressive growth shop, said Jim Goff, Janus' director of research since February. The reality is that only 20% of our assets are there now, he added.
The new funds will be added to the Janus Adviser series of funds, which caters to financial intermediaries, and in its three years since launch has amassed $3.5 billion. Funds will also be added to the Janus Aspen group, which launched in 1994 and is available to qualified plans and variable annuity investors. The Aspen fund group has more than $13 billion under management as of Sept. 30.
While Janus has scaled back distribution and marketing expenses, including nixing its TV ad spots, Janus executives hinted at a new advertising push, which will be used next year to promote its soon-to-be-introduced funds.
"Most of the new advertising dollars will be spent on supporting new investment disciplines that we will be putting in the pipeline," said Loren Starr, Janus' chief financial officer.
Pending formal board approval by the trustees of the Berger Funds, in March Janus expects to add several of the former Berger growth funds to its family and rebrand them with the Janus name. Berger Financial, as the current adviser to the funds, will cease to exist with the consolidation. But several of Berger's value funds are still up for grabs as the funds' trustees consider a new investment manager, including Janus [see MFMN, 11/4/02].
Debt Reduction
Beyond managing assets, Janus will be working to use free cash to pay off its debt, which could impede the company's progress going forward, Starr said. Janus is more highly leveraged than the average money management firm, he added. That could affect the firm's access to credit, as well as impede the amount of B or C shares Janus can offer.
Moody's Investors Service recently downgraded Stilwell's credit rating, and hinted that if the company doesn't take action to reduce its leverage, that rating could drop another notch, Starr said.
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