Janus Capital Group Inc.'s new strategic partnership with a Japanese life insurer puts the focus squarely on its fixed-income funds, but financial advisers are having a hard time looking past Janus' reputation as an equity manager.
Janus said Aug. 10 that it had reached an agreement with Dai-ichi Life Insurance Co. Inc., the second-largest life insurance company in Japan, for the insurer to purchase a stake of up to a 20%, as well as to invest $2 billion in Janus' strategies and give it a distribution boost in Japan.
A significant portion of the $2 billion will go toward Janus' fixed-income strategies, rather than the growth equity strategies it rode to prominence in the 1990s and into the middle of the last decade. Janus offers only four fixed-income products today, with a fifth on the way in January, thanks to $120 million being used toward seeding new funds.
“We need to foster growth in our fixed-income business,” Janus chief executive Richard Weil said on CNBC last Thursday. “We need to be more diversified, and not just offer growth stocks.”
WEAK EQUITIES
A look at the performance figures shows why fixed income is getting all the attention.
Just 18% of the assets in Janus' fundamental-equity strategies beat their Lipper Inc. peers over the three-year period ended March 31, according to Janus. The poor performance and investors' utter disdain for actively managed equity funds have led to 12 straight quarters of net outflows.
The firm's growth equity assets have fallen to $52.7 billion, from $72 billion in 2010.
The fixed-income funds, on the other hand, have been on a tear since Gibson Smith was named co-chief investment officer in June 2007. Janus' fixed-income strategies hold $23 billion in assets, 16% of Janus' total assets, up from $7.8 billion and 5% of total assets at the start of 2010.
Mr. Smith and his co-manager, Darrell Watters, use a relatively simple approach to fixed-income investing, said Michelle Canavan, a mutual fund analyst at Morningstar Inc.
They make top-down calls on whether the funds should be overweight corporate credits or government bonds, and rely on a team of analysts to mitigate the default risk by looking at fundamentals.
“They've made some good calls,” Ms. Canavan said.
The Janus Flexible Bond Fund (JANFX), for example, has had an annualized return of 8.6% since Mr. Smith joined in 2007. That ranks in the top sixth of all intermediate-term-bond funds and is very similar to the Total Return Fund (PTTAX) from Pacific Investment Management Co. LLC, the world's largest mutual fund.
The Janus High-Yield Fund (JNHYX) and the Janus Short-Term Bond Fund (JNSTX), also managed by Mr. Smith and Mr. Watters, ranked among the top quartile of their respective Morningstar categories for the five-year period ended June 30.
Janus' only other fixed-income fund, the Janus Global Bond Fund (JGBDX), was launched in 2010 and trumped its category average in 2011 and year-to-date.
The performance hasn't translated into big inflows, however.
Janus' fixed-income funds have taken in a net $4.6 billion since 2010, but that is the kind of inflow that star bond managers such as Bill Gross and Jeffrey Gundlach receive in three months, not nearly three years.
At least part of the reason for the tepid response is that advisers have a hard time looking past Janus' equity returns and reputation as a growth manager.
“I didn't know Janus had bond funds,” said Roger Wohlner, a financial planner at Asset Strategy Consultants, who stopped looking at the company's funds altogether after the market-timing scandal in 2003.
Melissa Joy, a partner at the Center for Financial Planning Inc., thinks of Janus as the “quintessential 1990s mutual fund firm” that rose through the rollicking decade of 18% annualized returns for the S&P 500.
With a strong track record, she said, she could see Janus getting more traction with its bond funds.
“Advisers aren't looking to buy every fund from one company,” Ms. Joy said. “They're looking to fill specific areas of their portfolio.”
Jane Ingalls, a spokeswoman for Janus, said: “Janus continues to focus on making advisers aware of the fixed-income performance and the depth of the fixed-income team.”
jkephart@investmentnews.com Twitter: @jasonkephart
