A new life on the ranch

Janus founder Tom Bailey hasn't retired; now he's rearing cutting horses

James Paton, Rocky Mountain News

Published July 22, 2006 at midnight

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CARBONDALE - Tom Bailey, like the gates at the front of his Iron Rose Ranch, is slow to open up.

One of Colorado's six billionaires, Bailey is found at the end of a rambling road in this mountain town near Aspen. Several creeks, including one he dubbed the "Crazy Woman," flow across the 200-acre property. Mount Sopris, at 12,953 feet, towers above the treeline.

Bailey, 69, grins and says he's "just a lonely old man." But he has company. Dozens of horses surround him, galloping gracefully to his side every time he strolls up to a fence. They recognize the man in a cowboy hat and dusty boots with spurs.

Bailey, who founded the Janus mutual fund group in 1969 and walked away a very rich man four years ago with $1.2 billion in his pocket, is sitting on the patio outside his rustic stone and wood home talking about the early days at the firm.

Bailey loves to have a good time in tight-knit groups, picking up the bill for annual fly-fishing events in Montana many years ago and once hosting the rock band Big Head Todd and the Monsters at a lavish ranch party to celebrate his 60th birthday, friends and family say.

However, he liked privacy during his more than three decades at Janus and has been able to stray even further from the spotlight since. Those who know him say they're surprised he opened his door to what is likely his first face-to-face profile in years.

Finished reflecting on the Janus Fund, his first product, he abruptly stands as if he's run out of patience.

He's not saying goodbye, just leading his guests into the living room where he gradually warms up, discussing what he calls his "third career," breeding and training horses.

Bailey eases into a brown leather sofa and inserts a video into the machine. Footage of a cowboy competing in the 2005 Summer Cutting Spectacular in Fort Worth, Texas, flickers on the flat-screen television.

The rider leads the horse through a herd of cows, finally separating, or "cutting" one. The horse moves back and forth, blocking the cow from returning to the pack, a dance that lasts 2 1/2 minutes.

A buzzer sounds. Spectators yell and yee haw.

"That was Spookys Smarty Pants of Iron Rose Ranch in Carbondale, Co-la-ra-da, ridden by Tom Bailey," the announcer's voice booms.

The contest, which judges participants' ability to control the cow, is part of a bid to promote his ranch in a crowd of potential horse buyers. It's certainly not about the prize money. The event resulted in a payoff of $15,000, pocket change for a man Forbes ranks 645th on a list of the world's wealthiest people.

"I did pretty well," he explains. "It was sort of a miracle - 220 of the best riders in the country. I was ninth. That was pretty damn good.

"It's like playing baseball and going up to the plate," he adds. "You walk up there. Take a cut. And see what happens."

Bailey has a dozen broodmares at his ranch outside Aspen, and the goal is to cross them with "interesting" stallions, bringing - with aid of embryo transplantation - about 16 foals into the world each year. Several are sold. Several are trained.

"We want to be known for producing great cutting horses," he says. "We want to produce winners."

The businessman breaks up his life into three distinct phases: managing a mutual fund, overseeing the company as its chief executive and, finally, running a portfolio of horses, some of which he expects will be worth a lot of money one day. One yearling he points to eventually could fetch $1 million, he estimates.

Bailey likes the idea of a new start. After all, he took the advice of his ex-wife, Jeanne Bailey, and named the firm Janus after the Roman god of beginnings.

Still, there are parallels, he believes, between picking stocks and breeding horses.

"If you buy 10 stocks, you like 'em all," he notes. "Two are complete disasters. Real train wrecks. You gotta be alert to sell those ones before they kill you. Maybe five or six, some will lose a little money, some will make a little. But they don't work out the way you think."

Then, two hopefully are huge success stories. "Those ones are outrageous," he says.

Sell and ask questions later

Bailey had his share of successes in his previous careers.

Janus, sold to Kansas City Southern in 1984, saw its aggressive "growth" style of investing and kick-the-tires research generate eye-popping returns and glowing headlines in the next decade.

Bailey and some of his key hires, such as Tom Marsico and Jim Craig, became money management celebrities.

Sandy Rufenacht was just a few years out of the University of Northern Colorado in Greeley when he heard a "little firm in Denver with less than $1 billion in assets under management" needed people with mutual fund experience. Rufenacht, living and working in the fund industry in Boston, returned to Colorado in 1990 to take a job at Janus.

Right away, he knew this was not your average mutual fund company. Janus made stock pickers at rival money managers look lazy.

Bailey pushed his troops to research stocks like an "FBI agent," Rufenacht recalls, and gave them first-class treatment, providing generous pay and perks, including car service, laundry, auto repair, laptops and Starbucks coffee.

And the stock sleuths responded. To cite one example, Rufenacht and analysts repeatedly stayed in the same room on the 17th floor of the Venetian casino in Las Vegas, snapping pictures and carefully checking to see whether blemishes such as cigarette burns had vanished and a loose knob on the sink had been tightened.

Others might have thought they were nuts and might have seen the exercise as a waste of money.

Yet Janus owned the Las Vegas company's bonds and believed the little things were important in evaluating its prospects.

Bailey also wore blue jeans and boots and let people dress casually - not just on Fridays - and travel where and when they wanted.

Janus in early 1999 was rated No. 17 in a Fortune magazine survey of the "100 best companies to work for in America."

The story mentioned a video, titled This Ain't No Wall Street Joint, which Bailey gave to all fresh recruits. The stirring introduction starred Bailey straddling a horse, riding across a snowy field.

"He preached 'Always treat your people well, and pay them well,' " says Rufenacht, who now runs his own firm, Three Peaks Capital Management. "And he took care of all those things so you could focus on managing money and not have any outside disturbances."

The word Baileyism was coined to describe his investment philosophies. One was "a stock knows what's wrong with itself long before you do," he adds.

"The price goes down and you can't figure it out," Rufenacht explains. "But sometimes you have to sell and ask questions later."

The little Denver shop, started as Bailey transitioned to Colorado from New York, grew into one of the country's hottest and largest fund providers. Launched with just a few hundred thousand dollars, including about $10,000 from Bailey's mother, the company watched its assets soar to more than $330 billion.

The relationship between Janus and its corporate parent became a tense one, however.

In 2000, the railroad operator followed through on a plan to spin off Janus and other holdings into a company called Stilwell Financial. Janus executives had fiercely resisted, seeking to be spun off separately.

"As long as they left us alone," Bailey adds, "we were on favorable terms."

But that didn't happen.

In 2001, Bailey sold his remaining stake in Janus to Stilwell. He was able to ditch the shares at 2000 prices, before the market's swoon, because of a "look-back" provision in his contract. The whopping $600 million he reeled in was equal to the amount he collected when he unloaded the first half of his holdings.

Bailey took a long bike trip in Spain and "hung out in Barcelona," contemplating his life. And the decision to depart came into focus.

But he didn't retire. "It's more accurate to say I quit," he says.

"I got fed up fighting about it," he says of the tension with the parent. "Thirty- three years was enough, and I told 'em I was through."

Meanwhile, the media, which had showered Janus and Bailey with praise, had started to turn negative. Reports portrayed him as an eccentric and inattentive CEO who lived a life of excess, often worked from Aspen near the ski slopes and was rarely around the office.

Daughter Miranda Bailey, an actress and producer in Los Angeles who appears in the credits beside Danny DeVito and Mischa Barton in the new comedy The Oh in Ohio, says he is indeed eccentric.

"Absolutely," she says. "I hope I am, too. Who wants to be dull?"

Bailey has a mischievous side, said his daughter, who was recently married. In his latest prank, he was able to doctor her wedding photos and black out the mouth of his former wife, Jeanne, to make her look toothless. Miranda Bailey says the joke was inspired after her father lost a tooth himself in a plate of spaghetti at a restaurant one night.

While he knew how to throw an extravagant party, she says he also lived fairly modestly. The son of a Heinz ketchup company executive, Bailey grew up in Ontario, not far from Detroit.

"I didn't know we had any money until I got out of college," says Miranda Bailey, who spent a few years of high school in Vail, where the family had a home, before going to Skidmore College in upstate New York. "I knew I could go to a private school, and we went to Hawaii on vacation, but it never occurred to me" the family was well-to-do.

Then again, she acknowledges a certain amount of wealth is necessary to reside in a mountain resort.

"Granted, this is Vail," she says.

Back at the office, there were other reasons for stress.

Janus portfolio managers had forgotten one of Bailey's key tenets and had held on to hot technology and telecom stocks too long. When the market tumbled in late 2000, 2001 and 2002, so did many of the Janus funds. The losses were staggering.

While Bailey was able to get out close to the top, plenty of investors in the portfolios weren't so lucky.

Finally, in June 2002, Janus announced he would step down. Bailey called it a "bittersweet moment."

The Denver firm's drama, however, was far from over.

Riding off into the sunset

Bailey pondered his next act.

The usual options for a rich, retired corporate boss came to mind: a hedge fund, sitting on boards of directors, an endowment, teaching. He says he considered each one.

Spending more time with the family would have been tough. Bailey was divorced in 1991, court records show, though he says he and his ex-wife remain friends. His daughter and son, who grew up in Vail and Denver, were busy and on their own.

Son Ryan Bailey is a guitarist whose music sounds "a little like Moby," his father says.

One thing was certain. He wanted another full-time pursuit.

"I'm not going to sit around in Aspen going for bike rides, playing golf and heading to the club," he says.

Bailey has loved Aspen since traveling to Colorado for spring break as a student. He went to Michigan State University and later received an MBA at the University of Western Ontario. The Rockies were the first mountains he had seen.

He became equally passionate about fly-fishing for trout and found the ideal spot to do it on a sprawling site owned by a "cranky old man" named Charles Foley.

The actor Robert Wagner, known for the old TV show Hart to Hart, also was looking at the Carbondale parcel, Bailey says, but backed out.

So Bailey moved in, buying the 100-acre ranch in the early 1990s for $750,000 and letting the aging rancher stay and run the place. He spent more than $10 million in 10 separate deals over the years to double the size of his hideaway, Garfield County assessor records show.

And he has dished out more cash to build an arena, a pen for simulating competitions and other structures in addition to the home, "all painstakingly thought out," he says.

Bridges span Goose Creek and the "Crazy Woman," named after he found a broken kayak containing a "brassiere and a tennis shoe."

Foley, whose picture featuring his rugged Marlboro Man looks still hangs on the wall inside a barn, was a horse guy. Bailey was not. Fishing was the only thing on his mind. The animals were an afterthought.

Bailey sees himself as a "Wall Street geek" and says he didn't get on a horse until he was 60.

Now he not only gets on them. He has a close relationship.

"They're more sensitive than you or I," he says. "They know if you're having a bad day or if you're anxious. They sense that stuff."

His interest in cutting horses was sparked by Barbra Schulte, an expert in the field who met him one night in the mid-1990s eating sushi in LoDo.

"He was very serious, very inquisitive - and somewhat skeptical," Schulte says, recalling the meeting arranged by a mutual friend.

After a lot of due diligence, he decided to give it a try, adds Schulte, who lives in Texas and advises the Iron Rose Ranch.

Brian Dennehy, the actor regarded for his tough-talking roles, has known Bailey since the early 1970s and describes his friend as "an enthusiast to the point of obsession."

Dennehy at the time they met was looking for acting work but jumping around from job to job, including a stint as a truck driver and a position with a New York investment firm. In the latter gig, Dennehy, clueless, as he put it, was sent to Colorado to try to win trading business from Bailey.

Five minutes into the conversation, Bailey leaned forward and flashed his signature "Cheshire cat smile," Dennehy remembers. " 'Can I ask you a question? You don't have a . . . clue about this, do you?'

Down and dirty

Bailey has devoted himself to horses and explains he hasn't had time for much else. He also is an investor - and a demanding one - in Miranda Bailey's production company, Ambush Entertainment, she says.

"There's no free money with him," says his daughter, who served as the executive producer of the 2005 movie The Squid and the Whale.

He did not tout his philanthropy, but he has donated money, quietly. Colorado State University last year announced it received a $3 million gift from the Iron Rose Ranch, money that would be set aside for the school's equine veterinary medicine program. Bailey's name was not attached to the news release.

The other topic he's uneasy with is Janus' recent history.

Maybe that's because he doesn't recognize the firm any more. Bailey, Marsico and Craig are long gone. Other high-profile managers, Helen Young Hayes, Warren Lammert, Rufenacht - and most recently Blaine Rollins - have left, too.

The Denver shop, once known for eschewing the Wall Street way, is now run by former Goldman Sachs executive Gary Black.

Traditionally seen as a "growth" specialist led by star managers, Janus these days has a key subsidiary, Intech, which bases decisions on a mathematical formula. The unit has swelled to nearly a third of the company with $50 billion in assets.

At first, Bailey is nonchalant about the transformation, stressing he is more concerned with his horses than mutual funds. Today he runs a business with 11 people, and the cutting horse authority Schulte says he's a "hands-on manager who keeps his finger on the pulse of every aspect of the ranch."

He remains a trustee of the Janus funds because he feels a sense of responsibility. Bailey says some people initially entrusted money to the Janus funds because his name was closely linked to them.

"When any founder leaves, the company changes," he says. "It's a natural evolution."

Bailey praises former CEO Mark Whiston, saying he is "the finest marketing executive I've ever had the privilege to work with," and believes the company still has talented people.

He reckons Whiston had bad timing, taking the helm just before New York Attorney General Eliot Spitzer accused Janus and other companies of allowing improper trading. Whiston ultimately stepped down in early 2004, and Janus agreed to pay $226 million to settle the charges.

Investors punished Janus, fleeing in droves.

Bailey is mum about the Black era at Janus.

Asked more about the current Janus on a tour of his ranch, Bailey stops his GMC truck on a dirt road in the middle of the property.

"Let's not talk about Janus," he says, raising his voice. "Let's talk about life."

He points to some of the temporary workers in T-shirts and baseball caps at the Iron Rose Ranch and emphasizes the importance of getting "down and dirty" with them, toiling by their side.

"If you do that," he adds, "they'll lay down their lives for you."

Bailey segues into a story about visiting Sam Walton many years ago. The Wal-Mart founder led Bailey around some of the company's stores in Arkansas and knew the names of employees.

"Executives have to get in there," he says. "Not just sit in the board room. This is how you run a business. That's what we had at Janus. That's the culture we had."

The truck, with the words Iron Rose Ranch emblazoned on the side, rolls forward again. Bailey's personal trainer, who's helping him stay in shape for upcoming cutting horse competitions, has arrived. It's time to re-focus on the business.

The sweat pays off. Bailey, riding his horse Play it Again Susie, finished third on Tuesday out of 148 in the first round of the 2006 Spectacular in Fort Worth. He advanced to the final, where he didn't do as well, placing 26th. He'll be back for more.

Tom Bailey at a glance

• Age: 69

• Net worth: $1.2 billion, according to Forbes

• Rank on the list of the world's richest people: 645

• The year he founded Janus: 1969

• The year he left: 2002

• What he's doing now: Breeding cutting horses on the Iron Rose Ranch in Carbondale

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