Janus CEO Weil launches new fund in battle with outflows
As he begins his fourth year trying to turn around Janus Capital Group , Chief Executive Richard Weil is overseeing the launch of a new fund aimed at filling a gap in its lineup, the latest effort to stem outflows at the Denver asset manager.
Janus Diversified Alternatives Fund joins the competitive "absolute return" category but offers a twist in how it allocates investments.
The fund is the eighteenth new investment strategy that Janus has launched since Weil took over in early 2010 and comes as Janus contends with several years of underperformance. But returns improved last year and Weil is looking to expand Janus' narrow product base to attract investors.
High on the list are funds to protect investors from wild market swings, Weil said in an interview in New York on Tuesday. Currently, Weil said, the approach used by many investors to balance risk "is failing in its mission to be sufficiently diversified."
Diversified Alternatives Fund instead tries to rethink how investors treat risk. Armed with data showing that many diversified portfolios hold assets highly correlated to equities - thus exposing investors to the same risks even if those risks come via diverse asset classes - the Janus strategy allocates instead with an eye on how risks intersect.
Holding stock in a computer maker, for instance, also means taking on risks inherent in commodities prices or currencies, said Richard Lindsey, chief investment strategist for alternatives. He is working on the effort with Andrew Weisman, chief investment officer for the area.
They would not say how they build the strategy around specific stocks. The fund's largest equity holding on December 31 was Colgate-Palmolive Co at just 0.25 percent of the fund's total value of roughly $27 million. Cash and equivalents made up 94 percent of holdings, a result of its heavy use of vehicles like futures contracts.
Other absolute return funds - which generally seek consistent returns - also use a wide mix of tactics like short-selling, futures contracts and inflation-protected bonds.
Though the funds generally carry higher fees, they have become one of the hottest categories tracked by Lipper, a unit of Thomson Reuters, and took in $6.8 billion in new money last year from investors.
BIGGER QUESTIONS
Weil concedes that the Janus brand of absolute return investing could require some education for individual investors. It also is not meant as a savior for the storied firm, from which investors withdrew $12 billion in 2012.
Some investors hope Janus will recover as investors move back into equities. Just in January, investors added $20.7 billion to equity funds, according to Lipper, the most of any month since January 2011. But the start of the year often brings money into equities as investors rebalance and there is much ground to make up. Investors pulled $129.2 billion from equity funds in 2012. Janus has not reported its flows for January.
Also not clear is whether a grand shift to equities would reverse Janus' outflows. An analysis by Thomson Reuters' Lipper unit shows handicaps for the company: Some of its biggest funds are out of favor. Its namesake Janus Fund now has about $8 billion of assets, down from $50.9 billion in August 2000.
Janus also lacks products in two of the five best-selling fund categories, equity income and international multi-cap core funds. It has very small funds in the others, including emerging markets, global flexible and absolute return.
"To the extent that recent investor preferences persist, it will be hard for Janus to regain lost assets," said Lipper analyst Jeff Tjornehoj.
LOOKING FOR A SOLUTION
Janus stock has been stuck below $10 since 2011, but not for lack of trying by Weil, previously an executive at PIMCO. His other efforts include putting more resources into selling and running Janus' bond funds, which now account for 17 percent of Janus' total assets under management of $156.8 billion, up 4 percent from the end of 2009.
Weil also struck a deal in August with Dai-ichi Life <8750.T>, Japan's largest listed life insurer, in which it agreed to buy up to 20 percent of Janus shares and distribute Janus products to Japanese investors.
Until Janus begins to report inflows many investors remain wary. "Given their performance, there's a big question mark in terms of whether people come back" to Janus funds, said an analyst for one investor, speaking on condition of anonymity because the comments were not authorized.
Janus still has its backers however. Chicago-based Ariel Investments was its second-largest holder as of last fall, and portfolio manager John Miller said that Janus stock was Ariel's most controversial holding. Still, Miller said he had confidence the big Janus funds will attract investors again.
"We do believe that investors will return to the equity market, and there's no reason why Janus will not be a beneficiary," he said.
(Reporting By Ross Kerber; Editing by Jennifer Merritt and Steve Orlofsky)