Investors pull $2bn from Janus funds as revenues drop on lower fees

Janus CEO Dick Weil

Janus CEO Dick Weil

“Neither the investment performance nor the flows were what I want or expect,” Janus chief executive Dick Weil told analysts.

Investors withdrew $ 2.4 billion during the quarter, including money from certain types of equity and fixed-income funds. Profits rose despite those outflows. Janus shares fell 56 cents, or 4%, to $ 13.37 on October 25.

Janus agreed several weeks ago to sell itself to British rival Henderson Group for about $ 2.6 billion amid increasing competition from low-cost providers.

Active managers such as Janus are facing more pressure from passive funds. But Weil told analysts the deal was unrelated to such pressures. “I’m very optimistic that this will drive, not defense against passive, but instead really genuinely exciting future growth opportunities for the combined firm,” he said. The deal is meant to help each firm diversify its products and broaden its global footprint, he said.

Janus said its overall assets rose, reflecting $ 6.7 billion of market-related appreciation, which was partially offset by the outflows. Assets rose to $ 198.9 billion as of September 30, from $ 194.7 billion in the previous quarter and $ 185 billion last year.

In all, the Denver-based firm posted a quarterly profit of $ 41.1 million, or 22 cents a share, up from $ 19.9 million, or 10 cents a share, a year earlier. When adjusted for a loss on extinguished debt, earnings were 24 cents a share.

Revenues fell 5.4% to $ 258.9 million, as investment management fees fell 1.9%. Analysts polled by Thomson Reuters expected an adjusted per-share profit of 23 cents on revenue of $ 260 million.

Operating expenses decreased 0.4% to $ 189.6 million, attributable to less marketing and other cost-cutting.

The firm’s value-specialist, Perkins Investment Management, was a bright spot, attracting net new money for the first time since the first three months of 2011, Weil said.

He highlighted the performance of the $ 1.6 billion Janus Global Unconstrained Bond Fund, which is run by well-known fixed-income investor Bill Gross, who joined the firm after leaving Pacific Investment Management Co in 2014.

Weil said client demand for that fund was picking up and that he expects more retail money to flow into it as its track record grows. He added, however, that while Gross may publicly compare his performance to that of the firm where he used to work, he is unlikely to travel around the world trying to gather assets for the fund. “Bill is not looking to re-create Pimco in his current seat,” he said.

Of Janus’s fundamental stock mutual-fund assets, 41% ranked in the top half of their Morningstar categories over one year at the end of the third quarter and 82% ranked there over three years, compared with 69% and 75%, respectively, at the end of September 2015.

Within the firm’s fixed-income business, 9% of bond mutual-fund assets ranked in the top half of their Morningstar categories over one year at the end of September and 15% ranked there over three years, down from 75% and 100%, respectively, a year earlier.

Performance at Intech, a unit that focuses on stock investing that relies on a mathematical-investment process, was a particular challenge. While 100% of mathematical equity mutual funds were beating their benchmarks over one and three years at the end of September 2015, 33% and 60% of the funds, respectively, were doing so at the end of the third quarter of 2016.

The money manager’s top executives and board conducted a detailed product-performance review after the third quarter. Weil said the firm determined that funds were following their intended strategies and that it didn’t find cause for “great panic.”

Write to Sarah Krouse at sarah.krouse@wsj.com

This story was first published by The Wall Street Journal

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