Denver-based Janus Capital, which has relied on the direct-to- investor and the mutual fund supermarket channels, is slowly expanding its business in the broker/dealer channel. In late September, Janus hired Russell M. Parker to spearhead the no-load fund firm's infiltration into third-party distribution programs such as no-transaction fee, wrap and retirement programs.
Parker was formerly with John Nuveen & Co. as head of the Chicago fund adviser's broker/dealer sales and marketing effort. Having spent eight years at Procter & Gamble's consumer packaged goods division, he knows first hand what benefits brand awareness and quality products can bring to a product manufacturer.
"There's an opportunity to take a great brand into an alternate channel of distribution and offer another arrow in the broker's quiver," he says. While many other fund groups have attempted to exploit a variety of distribution channels, Janus has remained focused on direct marketing to investors. Although the bulk of Janus' 19 funds are sold directly and, to a lesser degree, through fund supermarkets and fee-based planners, it is a natural evolution to expand into third-party distribution, said Chrissy Snyder, a spokesperson for Janus.
"We think it's such a competitive environment out there that it's good to diversify to keep the business strong," she said. By developing additional channels, Janus is taking out insurance against the risk that any one channel will become less lucrative.
In moving into a new channel, Janus now can market recent notable performances in a number of its funds. These funds have been outperforming their benchmarks and pulling in assets. According to CDA/Wiesenberger, through September 30, the Janus Twenty Fund had a one-year return of 32.52 percent. That compares to the paltry 9.05 percent that the S&P Composite index returned, and the almost three percent average decline most domestic funds suffered.
While the Janus Worldwide Fund had a meager one-year return of 0.24 percent, its index, the MSCI EAFE, fell more than 8 percent during the same period. The fund's five-year return was even better -- 17.8 percent versus the 5.65 percent return of its benchmark and the 9.37 percent of the average global equity fund.
"I don't think good products and distribution have to be mutually exclusive," Parker said. "Any good, strong brand should be able to participate in any of several distribution channels."
Janus' funds are currently available on a limited basis through Merrill Lynch, Prudential, A.G. Edwards, American Express and others. Penetration into the intermediary channel might have been undertaken sooner, Parker said. But there were not enough resources to support the intermediary sales efforts. In fact, according to Janus, lack of resources led the firm to turn away brokerage firms that previously approached Janus.
Parker expects to hire more people to assist him with the company's forays into the new channel. Janus has $87 billion under management. That includes $40 billion held in its 19 mutual funds, and $37 billion in separate accounts, including 401(k) plans, and investments for endowments and foundations.