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Outflows dampen Janus' earnings

Rocky Wire Report

Published April 24, 2008 at 8:44 a.m.
Updated April 24, 2008 at 3:10 p.m.

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Investors pulled $2.1 billion from Janus Capital Group mutual funds, causing the Denver-based money manager to miss analysts’ first-quarter estimates.

Net income climbed 5.1 percent in the first quarter to $37.4 million, or 23 cents a share, from $35.6 million, or 19 cents, a year earlier, the company said today in a statement. Per-share net was expected to be 28 cents, based on the average estimate of 14 analysts surveyed by Bloomberg.

“The markets were very challenging in the quarter,” Michael Kim, an analyst with Sandler O’Neill & Partners LP in New York, said in an interview. He had estimated earnings at 27 cents a share. “Janus just got caught up in that, along with everybody else.” Chief Executive Officer Gary Black, who took over in 2006, has had mixed success rebuilding Janus, which lost money in five of the past seven years after the collapse of the Internet stock bubble led to a 50 percent drop in assets. While fund returns have improved, the company has struggled to hang onto investors.

Investors withdrew $1.5 billion from Janus’ stock and bond funds and $600 million from money-market funds in the quarter. That compares with $2.5 billion in net redemptions in the last three months of 2007.

Assets declined 9.2 percent to $187.6 billion from year-end on the fund outflows and market depreciation. They increased 6.5 percent from a year earlier. Most of the net withdrawals, $1.1 billion, came from Janus’ Intech subsidiary, which uses complex mathematical formulas to pick trades.

Black has changed manager compensation and emphasized a team approach to running funds. Several managers left, including Scott Schoelzel and David Corkins, who ran the company’s two largest funds.

Revenue rose 13 percent to $281.2 million, while expenses climbed 7.1 percent. Earnings included a $9.5 million loss on consolidated seed capital investments, compared with a $17.6 million gain in the fourth quarter.

Janus closed up $1.51, or 6.02 percent, at $26.58 on New York Stock Exchange composite trading. The stock has lost 25 percent this year, compared with the 6.3 percent decline by the Standard & Poor’s Index.