Janus Capital Group Inc. (JNS), owner of the Janus, Perkins and Intech fund families, said third-quarter profit fell 16 percent as investors withdrew money for the ninth consecutive quarter.
Net income fell to $27.4 million, or 15 cents a share, from $32.5 million, or 18 cents, a year earlier, the Denver-based company said in a statement today. Analysts had expected earnings of 18 cents a share, according to the average of 11 estimates in a Bloomberg survey.
Profit margins at the company will fall because of performance-related cuts to fund-management fees if current market conditions persist, Chief Executive Officer Richard M. Weil told analysts in a conference call today. Under Weil, Janus has struggled to halt customer defections from the active stock funds that dominate the firm's products as equity markets have declined this year and investors turn increasingly to passive vehicles, especially exchange-traded funds.
“Performance fees are a meaningful consideration for us,” Weil said. “We can offset some of that with cost-control efforts, but it's safe to say we cannot respond completely.”
The firm's mutual funds charge fees that rise or fall in connection to the funds' performance over 12 to 36-month periods. Fee cuts reduced revenue by $4.2 million in the third quarter.
Investor Withdrawals
Janus rose 1.6 percent to close at $6.38 in New York trading after climbing as much as 5.2 percent on news that client redemptions slowed to the weakest pace in six quarters. Janus has declined 51 percent this year, most among the 19- company Standard & Poor's index of asset managers and custody banks.
Investors withdrew $2.4 billion in the quarter, excluding money-market funds. Janus-branded equity and balanced funds had redemptions of $3.2 billion, while fixed-income funds attracted $2.1 billion.
“The flows were actually a bit better than expected,” Michael Kim, an analyst with Sandler O'Neill & Partners LP in New York, said in a telephone interview.
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Market depreciation erased an additional $26.5 billion, bringing assets under management to $141 billion, a decrease of 17 percent from the previous quarter. Assets declined 17 percent from the previous quarter and 12 percent from a year ago.
Expenses Fall
The drop in assets and the fees they generate caused revenue to decrease 2.8 percent from a year earlier to $237 million. Expenses fell 13 percent as compensation and benefits, including incentive compensation, declined 9.7 percent.
The results include a loss of $20.6 million, or 6 cents a share, on the firm's internal investment vehicles and a benefit of $2.5 million for the reversal of income tax reserves. The internal investments represent seed capital in mutual funds and prefunded mutual-fund awards, Chief Financial Officer Bruce Koepfgen said during the call.
The MSCI AC Index of global stocks has declined 10 percent this year, while the Standard & Poor's 500 Index has fallen 3.4 percent. In the same period, investors have pulled about $100 billion from U.S.-registered equity funds, while depositing about $323 billion with bond funds and $67.9 billion in all U.S. ETFs, according to the Investment Company Institute, a Washington-based trade association.
The performance of Janus's funds has also deteriorated relative to their benchmarks. Of Janus's largest 20 stock and balanced funds, representing $69.1 billion in assets, four beat their benchmark index in the year ended Sept. 30, compared with nine over three years and 15 over five years, according to data compiled by Bloomberg.
BlackRock Inc. (BLK), the world's biggest money manager, said yesterday that third-quarter profit climbed 8 percent to $595 million.
--Bloomberg News
