Skandia Drops Janus as Small-Cap Manager

Published July 16, 2001, 1:00 a.m. EDT

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Cites Weak Performance, Manager Turnover

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

'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.'

But in a research report that went out to brokers this afternoon, American Skandia cited changes in portfolio managers as a primary reason for making the change. Moreover, Murray insisted that the Janus' 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 managers 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.'

Pending shareholder approval, the ASAF Janus Small Cap Growth Fund will become the ASAF PBHG Small Cap Growth Fund. Similar changes will occur within the firm's annuity product line. James Smith and Jerome Heppelman, who manage the PBHG Strategic Small Company Fund, will co-manage the fund.

Pilgrim Baxter won the spot from a field of 185 small cap managers, which was eventually whittled to a short list of seven. Said Murray, 'One of the key reasons we selected PBHG is their historic ability to deliver greater returns assuming less risk as measured by not only standard deviation but also their upside-downside capture and relative beta.'

Janus continues to sub-advise mid-cap, large-cap, international, and value portfolios across American Skandia's product lines. Officials for the firm were unavailable for comment by deadline.

In similar but unrelated news, American Skandia is switching the sub-advisor for one of its money market funds from JP Morgan to Wells Capital Management. In this case, market dominance, rather than performance, affected the change. Both sub-advisor changes are expected to take place in September.