American Skandia is dropping Janus' small-cap portfolio from its product line. On July 17, the Shelton, Connecticut-based firm filed a proxy with the Securities and Exchange Commission to replace Janus with Pilgrim Baxter for its small-cap mutual fund and variable annuity offerings.

Janus currently manages $446 million in American Skandia's variable annuity product, the AST Janus Small Cap Portfolio and $205 million in it mutual fund product, the ASAF Janus Small Cap Fund.

"This is strictly performance related," said Michael Murray, senior VP and chairman of American Skandia's investment committee. "We still have a very large and significant relationship with Janus which both companies are committed to."

In a research report to brokers posted on the firm's Web site, American Skandia stated "key portfolio manager departures," "under performance," and "style drift and sell discipline," in that order, as reasons for the change. Murray insisted that the firm's vigilance has not increased with the shift in the market.

"The marketplace expects Skandia to react when we see the fundamentals in a fund change," Murray said. "In this particular case, we've seen some portfolio manager departures with the fund. Those in combination with the performance led us to put this fund under particular scrutiny, but we apply the same level of analysis to all funds."

While Janus spokesperson Jane Ingalls said the firm was not surprised by the change, she asserted that Janus stands behind the fund's long-term performance.

"Certainly, we're disappointed, but we understand the postion Skandia is in and we're not concerned with the short-term performance, but the long-term performance for the fund has been very strong," she said.

The Janus Small Cap portfolios closed to new investors approximately a year after American Skandia began offering them in January of 1999, said Ingalls. Janus made that decision based upon the fund's triple-digit performance that year. Ingalls pointed out that the Janus Venture Fund, upon which the portfolios are based, has been closed for ten years. Both portfolios will reopen when PBHG begins managing them.

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