Brokerage said to pull Twenty and Forty funds from offerings; 'outlfows are clearly getting worse'
Janus Capital Group Inc., the money money manager struggling to reverse almost two years of customer withdrawals, had two of its largest equity funds pulled from a Bank of America Merrill Lynch model portfolio, according to two people familiar with the decision.
The $9.24 billion Janus Twenty Fund and $6.29 billion Janus Forty Fund were dropped last month from a standard collection of funds by Merrill Lynch, the second-largest U.S. brokerage by head count, the people said, asking not to be identified because they weren't authorized to release the information. Janus fell the most in almost three months today.
“Outflows are clearly getting worse,” Michael Kim, an analyst with Sandler O'Neill & Partners LP in New York, said in a telephone interview. “These brokerage platforms hold a lot of sway in terms of overall flows, particularly for a retail- oriented franchise like Janus.”
Chief Executive Officer Richard M. Weil, hired from Pacific Investment Management Co. in February 2010, has expanded the product line of Denver-based Janus, adding fixed-income funds and announcing this month the acquisition of a hedge fund and a plan to introduce more alternative-investment products. That hasn't stopped defections by investors, who withdrew a net $18.5 billion over the past seven quarters.
Janus fell 6.4 percent, the most since Feb. 22, declining 69 cents to $10.14 at 4:03 p.m. in New York Stock Exchange composite trading. Janus is the worst-performing stock this year in the 18-member Standard & Poor's index of asset managers and custody banks. It has fallen 22 percent, compared with the 1.2 percent decline by the index.
Janus mutual funds lost $770 million in redemptions in April, more than triple the $230 million in March, according to research firm Morningstar Inc. Janus Twenty and Janus Forty together lost an estimated $586 million in April and the 10 largest Janus-branded equity funds lost a combined $1.06 billion, according to data compiled by Bloomberg.
Janus, which owns Perkins Investment Management and quantitative investment unit Intech, invests about 90 percent of customer assets in stocks.
Charles Schwab Corp., the largest independent brokerage by client assets, has reduced to three from 13 the number of Janus funds on its OneSource Select List of recommended products since the first quarter of 2010, according to the San Francisco-based firm's Web site.
The Merrill portfolio that dropped the two funds is open to retail clients with separately managed accounts, requiring a minimum balance of $100,000. Merrill routinely rotates funds in or out, or changes their weightings, and didn't give a reason for dropping the Janus offerings, one of the people said.
“We regularly review our portfolios and make adjustments based on portfolio objectives and market conditions,” Selena Morris, a Bank of America Corp. spokeswoman, said in a May 13 e- mail. Merrill Lynch is owned by Charlotte, North Carolina-based Bank of America.
James Aber, a Janus spokesman, declined to comment on Merrill's decision. He said the company believed that the new products, as well as improved performance at Intech funds, should eventually reverse the withdrawals.
“Despite the near-term conditions, long-term performance is still very strong across the company,” Aber said in a telephone interview, adding that 46 percent of the firm's funds held four or five-star rankings from Morningstar.
Janus Twenty, which concentrates its holdings in 20 to 30 large companies, lagged behind 99 percent of competing funds in 2010, returning 7 percent, including reinvested dividends, according to data compiled by Bloomberg. Over the past five years it has returned an annual average of 6.5 percent, beating 92 percent of peers. Janus Forty, a less concentrated fund that can also invest in small and medium-sized companies, trailed 98 percent of competing funds last year with a 5.6 percent return. It returned an average 5.6 percent over the past five years, trailing 70 percent of competitors.
Janus managed $174 billion as of March 31, down from a 2000 peak of $321 billion, when the booming market for technology stocks made it the fastest-selling family of U.S. mutual funds. The subsequent crash of tech stocks and a trading scandal led to a customer exodus.
Under Gary Black, the previous CEO who took over at the start of 2006, assets grew again, only to plunge with the financial crisis. Black reorganized the company and cut the influence and pay of star fund managers, leading to the departure of at least 15 fund managers and senior executives. He resigned in July 2009.
--Bloomberg News--
