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The Janus Retrospective
(This page contains selected FundAlarm items dealing with Janus,
from February 1998 through September 2003. With many
thanks to Linkster Ted, of the FundAlarm Discussion Board,
who dug all this stuff out of the FundAlarm archive.
The comments preceding each item are by Roy.)

[The FundAlarm archive dates back to November 1997, and the following was our first Janus item. It was also probably a turning point for Janus as a firm. As you'll see if you skip down to the third item, Craig's conversion was successful, but it also set Janus up for a huge fall]

[February 1998] Traveling down the road to Dismal, Jim Craig has a vision: The Janus Fund, managed by Jim Craig, is one of our perennial 3-ALARMs.....It's also one of those funds with a huge gap between reputation and performance......In 1993, Craig told Kiplinger's magazine that he had never known a mutual fund manager who did well by "changing his discipline to fit the market"......In the February, 1998 issue of Kiplinger's, Craig is quoted as saying that stocks now merit higher price-earnings multiples "because of the improving profitability of companies".....According to Craig, his old methods of stock selection and fund management have "just been blown away" by current market conditions.


[Would Janus have been a different firm if Marscio hadn't left? Would he have kept a lid on the overly-aggressive Janus managers? Would he have been a better public face for the firm? Would he have kicked the market timers out on their asses, as they deserved? Hey, if we knew the answers, we'd have a 900-line]

[March 1998] Marsico vs. Bailey: The guy with the tie tells his side of the story: Star fund manager Tom Marsico quit Janus last August, suddenly and under somewhat mysterious circumstances......There was clearly some friction between Marsico and his boss, Tom Bailey (left), but the details were never made public.....In the March issue of Money, Carla Fried sketches an interesting profile of Marsico, who now runs his own fund company.....As Marsico tells the story, he gradually came to believe that Bailey was hurting the performance of existing funds by continuing to open new ones.....Marsico would recruit and train analysts, who were then taken away to staff new funds.....Marsico also felt that Bailey devoted a disproportionate amount of firm resources to small-cap funds, while Marsico's interests (and the bulk of Janus assets) lay in the mid- and large-cap area.....Marsico had no comments about Bailey's eyewear.


[We'll take a semi-prescient award for this item]

[August 1998] Jim Craig has been in charge of the Janus Fund since June 1986....For the first 10 years or so, he was a classic value investor, and the discipline served him well....But in April, 1997 something happened to Craig that hadn't happened in eight years: The cumulative return of the Janus Fund began to trail the benchmark S&P 500......Throughout the spring and summer of 1997, Janus fell even further behind the S&P 500.....In the fall of 1997, Craig apparently had enough, and he decided that a traditional value investor couldn't beat the current large-cap market.....Rather than continuing to fight the market, Craig started buying and holding stocks that he would have considered overvalued just six months earlier.

Fast-forward to August, 1998, and the results of Craig's recent conversion have been remarkable: The average P/E of the Janus Fund has increased about 60%.....Not coincidentally, the 12-month return of the Janus Fund now exceeds the 12-month return of its benchmark for the first time since FundAlarm began tracking it in July 1996:

Is Craig a genius or a lemming?.....The jury is still out, but some of you can probably guess in which direction we are leaning.....Here's one thing we do know: Managers who fundamentally change their style in response to market conditions are rarely successful in the long term.....Few large funds have turned around more dramatically than Janus, or for reasons that are so clear-cut....It has been an interesting fund to watch, and we'll continue to keep an eye on it.


[This is the first mention in FundAlarm of what became a huge problem for the Janus fund family. Investors who took heed, and cut back to one or two Janus funds, instead of four or five, were probably thankful]

[May 1999] Janus funds continue to have a significant amount of common stock ownership.....This fact partially explains why 12 of 14 Janus funds were recently beating the market.....It also suggests that you might want to take a close look at diversification (or lack thereof) if you own more than one Janus fund..... Even Jim Craig, Janus chief investment officer, was recently hard-pressed to distinguish among his five Dolly funds (right)..... Which stocks are most commonly owned by these Janus invest-alikes? .....Cisco Systems, Microsoft, Time Warner, and Pfizer.

Janus Fund

Janus Twenty

Janus Gr&Income

Janus Mercury

Janus Olympus

[Yes, this really was a sign of the market top]

[February 2000] Janus Enterprise began operations in September 1992, which means that the fund has been in existence for 89 months.....From day one through the end of its 61^st month (September 1997), Janus Enterprise delivered a return that was dead-even with the S&P 500.....In the 28 months since then, Enterprise has almost tripled the return of the S&P 500 -- an exceptional performance, but one that covers less than one-third of the fund's existence.....A recent headline in Morningstar proclaimed:

"Janus Enterprise, Other Great Funds May Close"
If you're looking for signs of a market top, perhaps we can add this one to the collection: Morningstar is now hyping a fund as "great" because it has outperformed its benchmark for barely more than two years.


[Some amusing Bubble Madness]

		[April 2000] Poor Janus: Even though a number of the Janus funds are closed, and some don't even exist yet, investors still insist on sending checks.....Instead of going through the "hassle and headache" of returning those checks (open envelope, identify check as incorrect, type mailing label, insert check in return envelope, seal, stamp, mail), Janus has instituted a new policy: All incorrect checks will automatically be deposited in a Janus money market account.....Janus will close the money market account upon request, or transfer the money into any available Janus fund, but now it's the investor who will have the hassle and headache, along with an unexpected 1099 form.....Meanwhile, Janus earns the management fee from the money market account.
	"Shut Out of a Janus Fund? Don't Expect Your Check Back Right Away," Ian McDonald, TheStreet.com, March 21, 2000

[Janus had become a big, lumbering, not-too-bright elephant, and the handwriting was on the wall]

[April 2000] On January 27, Janus entered into a much-ballyhooed private equity ("PIPE") deal to purchase almost $1 billion worth of Healtheon/WebMD, at $62 per share.....As of March 28, Healtheon/WebMD was trading for about $31 per share, which means that Janus had a paper loss of almost $500 million on its investment.....As one reporter recently noted: "If Janus thinks the stock is worth $62 and investors think it's worth [$31], someone is wrong. Either the stock is a bargain at today's price or Janus overpaid for a company of which it now owns more than 10%."
"Janus' Healtheon/WebMD Stake Turns Into Big Pain," Ian McDonald, TheStreet.com, March 8, 2000


[Ah, we were all so innocent then, and so easy to amuse]

[June 2000] Not that the Janus funds need another advantage, but according to a recent column in Fortune magazine, they have one: The sexiest recorded male telephone voice in the mutual fund industry....."The Janus guy--well, the Janus guy sounds like a cross between Dick Cavett and George Clooney," according to reporter Erin Kelly. "I imagine him wearing a pair of old Top-Siders, sipping Glenlivet..." Janus has never been known to pass up a marketing opportunity (for example, the new Strategic Value fund), and Phone Man has reportedly grabbed the attention of senior Janus executives.....In the works: A revamp of the Janus institutional sales staff.

Janus marketing trainees

[We may never know the true story of Janus' liquidity problems, and how much they contributed to the firm's punishing losses, but here's a hint of things to come]

[June 2000] On May 10, Janus closed three more of its funds: Worldwide, Olympus, and Global Life Sciences.....Jim Craig, Janus Chief Investment Officer, noted that the closings ensure "that the portfolio management team can maintain the flexibility to find the most dynamic companies around the world in which to invest".....Two reporters, writing about the closings, noted that Janus now has virtually no flexibility in redesigning or moving its fund portfolios: "It would take months to steer [Janus] funds into less growth-oriented stocks without disrupting the market. For example, in mid-April, when Global Life Sciences made a move away from biotechs into pharmaceuticals, it put pressure on the entire biotech sector..."* So who's got it right when it comes to flexibility, Jim Craig or the reporters?.....Living in Los Angeles, as we do, we can't help thinking of the LaBrea Tar Pits:

A lesson for Janus?

Large animals, accustomed to dominating their territory, went out looking for a drink or a meal.....They came to the Tar Pits, which looked like just another lake, stepped in, and got stuck forever -- perhaps the ultimate loss of flexibility.....In other words, we think the reporters have called this one correctly.....We predict that you'll be hearing more about problems at Janus due to the size and visibility of its funds, problems that weren't on anybody's mind when Janus was still dominating its territory.
* "Behind Closed Doors, Is Janus Turning Bearish?", Ilana Polyak and Ian McDonald, TheStreet.com, May 10, 2000


[The following item, about Janus taking ownership of TomMarsico.com long after he had left the firm, got us more press coverage than any single item we have ever published. Lesson learned: People like a story that's easy to understand, with a nice little twist of nastiness and revenge]

[August 2000]....Janus has...reserved a slew of dot-com manager names......All you Scott Schoelzels out there will be disappointed to learn that Janus owns the name scottschoelzel.com, as well as the dot-com names for almost all of its other fund managers.....For some reason, Janus seems to think that Jim Goff (of Janus Enterprise) is a particularly hot property.....Jim Goff is the only name that Janus has reserved as a dot-net and dot-org, in addition to JimGoff.com.....In what appears to be a stunning in-your-face move, Janus has also claimed TomMarsico.com.....Janus acquired this name on December 6, 1999, long after Marsico had quit Janus to start his own successful fund firm.


[Oh, and we still like happy endings]

[September 2000] FundAlarm ruins a day at the country club: Last month, we reported that the Internet address TomMarsico.com had been grabbed by Marsico's former employer, Janus, more than two years after Marsico left the firm.....New York Times reporter Danny Hakim picked up on our story, and it turns out that the tale is even better than we thought.....Jim Goff, a Janus fund manager, apparently decided on his own to take the Marsico name, and Marsico wasn't aware that his name had been hijacked until the Times reporter told him.....Marsico was not amused by Goff's caper, especially since Marsico originally recruited Goff, and helped him get his Janus job.....Anyhow, at a "chance" country club meeting several days after the story broke, Goff apologized to Marsico, and offered to return TomMarsico.com for free......Marsico still sounded a bit peeved: "This is a guy who I brought to Janus. I got him into a country club he lives right on. He doesn't say, 'It's nice you sold your business, congratulations.' It was, 'By the way, since The New York Times called me, I bought your domain name.'"


We love happy endings: On August 14, just two weeks after FundAlarm got the ball rolling, Jim Goff did the right thing, and Tom Marsico was officially reunited with TomMarsico.com.....And now, we check our e-mail every day, certain that Tom will eventually get around to thanking us.


[A few months before the following item appeared, Janus was spun out of KC Southern Industries and into a new public company, Stilwell Financial, along with the Berger funds. This spinoff led to the departure of Jim Craig]

[September 2000] Mark McGwire Quits Major League Baseball,
Will Coach Senior's Softball Team ------------------------------------- Slugger says, "I'm looking forward to the new challenge"

If you saw this headline in the sports section, you might be dubious.....So when we heard that Jim Craig of Janus was retiring at age 44, to help manage money for his new family foundation, something didn't seem right.....It still doesn't.....Craig was the chief investment officer at Janus, and he was also the institutional thread that held together all of the Janus funds and managers.....Some observations about Craig's departure:

• It's clear that Craig was planning this move since at least October 1999, when he announced his resignation as manager of the flagship Janus fund. Craig didn't tell the straight story to the press when he stepped down from the Janus fund, so there's no particular reason to believe anything he says this time, including his prediction that "There will be nary a ripple in Janus operations."
  
  
• Craig says that the recent spinoff of Janus into Stilwell Financial "had no effect at all" on his decision to leave. Uh huh.
  
  
• In our experience, tightly-knit work groups (like Janus) are fragile structures. When anyone leaves, especially the boss, there's always an unsettled period. We can't imagine that there won't be some significant operational and morale problems at Janus over the next few months.
  
• The new Craig Family Foundation will initially be funded with $1 million. Craig is used to running a firm with about $300 billion under management, so it should take him about 10 minutes a week to oversee the Foundation's money.
  
  
• FundAlarm knows the foundation world well -- Roy's day job is doing what Craig will be doing -- and there are plenty of opportunities for good, rewarding work. But considering where Craig has been, it's unlikely that any foundation will be able to keep him interested for more than a few months.

The foundation gives Craig a good, temporary cover.....We predict that Craig will be back in circulation soon, with his own money management firm, and that one or more of his Janus colleagues will join him.....Craig's departure is no reason, by itself, to sell your Janus funds.....But when the first Janus manager finally defects, we predict that others will follow.


[Linkster Ted gets the full-prescient award for this one. It took a bit longer than Ted predicted but Berger was, indeed, merged into the Janus fund family as of January 2003]

[September 2000] Ted, a regular on the FundAlarm Discussion Board, has passed along a juicy rumor that also makes a lot of sense: The entire Berger fund family will be rolled into the Janus family within the next 12 to 18 months.....Stilwell Financial owns both firms, so it's unlikely that either Berger or Janus could veto the move......This kind of consolidation would also result in significant cost savings, which has to be attractive to Stilwell management.....Ted can't publicly reveal the source of his rumor.....But he did share the source with FundAlarm, and we believe his tip is worth taking seriously.


[A brief quote, but still one of the most arrogant comments in the history of FundAlarm. Now do you hear those warning bells?]

[September 2000]

"Our goal is to know our companies better than they know themselves."

This is a quote from a Janus spokesman, and it's one of the most misguided comments we've heard in quite a while.....If outsiders really can get to know a company better than the people who run it, that's one of the best reasons we can think of not to invest in that company.....And if Janus thinks that a handful of its twenty-something analysts, spending a few hundred hours a year, can get to know a successful business better than the people who run it full time -- well, maybe Janus deserves that reputation for arrogance after all.


[The facade starts to crack]

[January 2001] In the old days, if you wanted information from the Oracle at Delphi, you had to sacrifice a goat.....Recently, if you wanted information from the folks who run the Janus funds, even animal sacrifices wouldn't have helped......So why did Janus suddenly throw open its doors to the financial press on December 14?.....Perhaps the following chart of year-to-date returns will shed some light on the answer:

Name of Janus fund	Year-to-date return (%) (through 12/14/00)
Enterprise	-26.3
Global Technology	-25.6
Mercury	-16.3
Olympus	-16.9
Overseas	-14.9
Special Situation	-16.3
Twenty	-23.5
Venture	-43.7
Worldwide	-12.0

Yes, it appears that Janus managers are fallible after all.....And now, when the going has gotten tough, the tough folks at Janus have turned to their PR people, and the PR people now snuggle up to the same financial journalists who couldn't get the time of day from Janus nine months ago, when Janus was flying high.....The Janus managers now admit (A) that they might have gotten too caught up in the "overenthusiasm" for technology growth stocks, (B) that they got a "little carried away," (C) that they didn't recognize certain stock valuations had become "overextended," and (D) that they didn't pay enough attention to their heavy overweightings in the tech and telecom sectors.....In other words, the folks at Janus now admit that they kinda sorta blew it, in exactly the way that many people over the last two years said they were blowing it, but which Janus consistently and arrogantly denied.....Unfortunately, no one can tell if the Janus managers are being sincere with their mea culpas, or if humble confession is merely the marketing flavor of the day.....Perhaps Janus has learned a lesson from the political arena: Nobody will care what you did -- much less hold you accountable -- if you hang your head and say that you've learned a lesson.


[Janus tries out its version of Newspeak, pretending that it's been a value manager all along. Benjamin Graham, the father of value investing, isn't pleased]

[March 2001] Benjamin Graham is widely regarded as the father of value investing, so it was somewhat surprising to see his name invoked in Jim Goff's year-end letter to shareholders of Janus Enterprise, a growth fund if there ever was one:

	"Benjamin Graham, perhaps the most famous practitioner of the fundamentally-based, company-by-company approach we follow, once said that 'In the short-term, the market is a voting machine, and in the long-term, it's a weighing machine.' Ultimately, we believe the strong earnings growth each of our holdings is capable of delivering will tip the scales in our favor."
--Thanks to FundAlarm reader William Cornwell, of Fredericksburg, VA, for bringing this item to our attention

Benjamin Graham responds:

Dear Mr. Goff:

I urge you to read "The Intelligent Investor" again (or, perhaps, for the first time). If you find even one sentence in my book that specifically supports the Janus style of investing, please let me know. You might want to start with the Introduction, where I wrote:

1. Obvious prospects for physical growth in a business do not translate into obvious profits for investors.

2. The experts do not have dependable ways of selecting and concentrating on the most promising companies in the most promising industries.

I would be especially interested in learning how the "margin of safety," the guiding principle of my entire investment career, applies to even one holding in your fund's portfolio.

Mr. Weitz is handling my e-mail. I look forward to hearing from you.

Sincerely,

B. Graham


[The following is one of our favorite Janus items. There's a lot of investment wisdom here, for people who are willing to pay attention]

[April 2001] OK, let's beat up on those growth blowhards one more time: Not too long ago, Janus was the 500-pound gorilla of growth investors, and Janus was destined to change the mutual fund world forever.....Right?.....Wrong.....The table below shows several Janus growth funds paired with several well-known value funds, along with their respective performance numbers for the past five years.....Pop quiz: Which fund performed better over the past five years, the flagship Janus fund, or the stodgy, value-oriented Investment Company of America?.....Take a look below, and prepare to be surprised:

Value Fund/Janus Fund	Style	5-Year Return (% annlz'd)
Ameristock (AMSTX)	Large-cap value	21.67%
Janus Growth & Income (JAGIX)	Large-cap growth	21.65%
Selected American (SLASX)	Large-cap value	20.13%
Janus Mercury (JAMRX)	Large-cap growth	20.01%
Excelsior Value & Restruct (UMBIX)	Large-cap value	21.08%
Janus Twenty (JAVLX)	Large-cap growth	19.94%
Nations Intl Value A (EMIEX)	Large-cap value (Foreign)	18.97%
Janus Overseas (JAOSX)	Large-cap growth (Foreign)	18.58%
[!] Investment Co of America (AIVSX)	Large-cap value	16.62%
Janus (JANSX)	Large-cap growth	16.32%
Amer Century Target 2020 (BTTTX)	Government Bond*	11.01%
Janus Venture (JAVTX)	Small-Cap Growth	10.99%

* Sorry: It's not a value fund, but we couldn't resist the comparison
Next time any fund company or investment style seems unbeatable -- and it will happen again -- you might want to remember this table.


[As flawed as Bailey was, he was the firm's last connection with its past. Boys and girls, can you spell a-c-c-e-l-e-r-a-t-i-n-g d-o-w-n-h-i-l-l?]

[April 2001] Tom Bailey, the CEO of Janus, now owns 0% of the company that he founded back in 1969.....Based on a buy-back formula contained in a 1984 agreement, Bailey had the right to receive about $600 million for his remaining Janus shares if he sold them this year.....If Bailey chose to wait, the buy-back amount could have been millions of dollars less.....Bailey decided to go ahead with the sale, and he claims that (a) his decision was a simple matter of dollars-and-cents, and (b) his commitment to Janus is as strong as ever.....Yeah, yeah, but here's our question: If Bailey really wanted to stay, and if the new owner of Janus (Stilwell Financial) really wanted to keep him, why didn't both parties just renegotiate Bailey's buy-out agreement?.....The answer, it seems to us, is that Bailey really wanted to leave, and Stilwell really wanted him to go.....Bailey will continue as a director of Janus, but he's lost the right to control the selection of Janus Board members, and that is likely to become another source of friction between Stilwell and the day-to-day managers of the Janus funds.....Simply as a matter of human nature, Janus fund managers can't possibly feel the same sense of loyalty to Bailey, or to his company.....Right on cue, however, all of the senior Janus fund managers announced that they had no plans to leave the firm in the "foreseeable future".....Which makes you wonder how far the "foreseeable future" really is.


[Janus starts shuffling and scrambling, and it still hasn't stopped]

[February 2002] Underperforming. Inconsistent. Promoted. Those three words pretty much describe the investment career of Jim Goff.....Goff has run Janus Enterprise since its inception and, during his nine-year tenure, this has been a wildly inconsistent, mostly underperforming fund.....Now, Janus has decided to shuffle its corporate management and, voilà, Goff finds himself removed from Enterprise and put in charge of research for the entire firm.....In his new position, Goff will be responsible for expanding the firm's stock coverage, and coaching and training its staff of 43 analysts (presumably, to perform better than he has).....Jonathan Coleman takes over for Goff at Enterprise .....You may remember Coleman from a couple of years ago, when he was one-half of the team that presided over the collapse of Janus Venture.


At the same time that Goff (above) was kicked upstairs, Helen Hayes was appointed Managing Director of Investments for Janus.....In that role, Hayes will be responsible for "directing all portfolio management functions at Janus".....It sounds like a big job -- it should be a big job -- but Hayes is also staying on as lead manager of Janus Worldwide and Janus Overseas.....Investors in these funds might as well assume that Hayes is gone, because that is almost certainly the reality as her new job kicks in.


[Well, at least Bailey's reputation is intact, for whatever that's worth]

[July 2002] This often happens after a really big swelling:




Actually, the headline above refers to the departure of Janus CEO Tom Bailey, who is quitting his job effective July 1, 2002.....Yes, when Bailey sold his remaining billion-dollar chunk of Janus stock late last year, he said that he was going to stick around.....Yes, Bailey was an important part of the Janus culture.....Yes, finding the right replacement will be essential in keeping the prima donna Janus managers in line.....Yes, there's been a history of ill-will between Janus fund managers and Stilwell Financial, the company that owns Janus.....Yes, according to a recent press release, everything is hunky-dory at Janus, and there won't be any further changes.....And no, you probably shouldn't believe it.


[July 2002] From the horse's mouth: Or, more accurately, from the 10-K report of Stilwell Financial Inc., which was filed with the SEC on March 20, 2002 (remember, Janus is owned by Stilwell):

"...a formal succession plan in the event of a departure from Janus by Mr. Bailey has not yet been fully developed. There can be no assurance that an adequate succession plan will be effected or that the loss of Mr. Bailey's services, or the services of senior portfolio managers, for any reason would not have an adverse effect on Janus and Stilwell. Furthermore, relations between Janus and Stilwell were strained primarily as a result of disagreements over the structure of the spin-off of Stilwell to KCSI's [Kansas City Southern Industries] common stockholders that was completed on July 12, 2000. Continuation of these strained relations could result in the loss of key Janus employees or other management personnel or impair the ability to attract new personnel."

And more:

"Relations between Stilwell and the management of Janus have been strained, primarily as the result of disagreements over the structure of the spin-off from KCSI. Prior to the spin-off, a number of minority stockholders and employees of Janus, including members of Janus' management, its chief executive officer, its former chief investment officer, five of the six directors of Janus and others proposed that KCSI consider a spin-off of Janus in addition to the spin-off of Stilwell. The KCSI board of directors ultimately rejected this proposal. Press reports have appeared in which certain Janus employees expressed objections to the Stilwell spin-off and other disagreements with the structure and direction. While Stilwell and Janus have attempted to resolve some of these disagreements, not all disagreements have been resolved. Continuation of these strained relations could result in the loss of key Janus employees and Janus management, which could have a material adverse effect on Stilwell. The portfolio managers and other key employees of Janus are not subject to any non-compete agreements that would preclude them from participating in a competing financial services business..."

[Janus finally gets its dream corporate structure. Then they put a marketing guy in charge. Cue the foreshadowing music: Dumb-de-dumb-dumb-dumb.....Dummmmb....It's a market-timing scandal!]

[October 2002]A wave of humility sweeping over the Janus funds would be huge news.....In the absence of that, we merely have some big news to report: There's going to be a major shakeup in the corporate structure of the Janus and Berger funds.....First, some quick background: For the past several years, Janus has been a subsidiary of publicly-traded Stilwell Financial Inc......Berger Financial Group, which runs the Berger funds, has been another Stilwell subsidiary.....Berger manages most of its funds in-house, but a few of its funds are run by subadvisors.....As of December 31, 2002, you can expect the following changes:

• Stilwell Financial Inc. will disappear and Janus Capital Management Inc., a new publicly-traded company, will take its place.
  
  
• Janus Capital Management Inc. will own several subsidiaries, including Janus Capital Management LLC, which will run the Janus mutual funds. No management changes are currently planned at any of the Janus funds.
  
  
• Berger Financial Group will be dissolved, and Berger's in-house funds will either merge with existing Janus funds or turn themselves over to Janus managers.* (The trustees of the Berger funds have hinted that they might look for managers outside of Janus, but that isn't going to happen.)
  
  
• The four Berger funds currently run by subadvisors won't undergo any immediate changes, except for a name change (probably to "Janus-something").**
  
  
• Mark Whiston, a marketing guy with no investment experience, will take over as CEO of Janus Capital Management Inc. (i.e., the parent company).
  
  
• Helen Hayes, manager of Janus Worldwide and Janus Overseas, will join the Board of the parent company, giving her even less time than she has now to oversee the day-to-day operation of her funds.
  
  

According to a number of press reports, these changes mean that Janus fund managers have finally won the battle to run their own company, to which we say, "Be careful what you wish for".....Under the old structure, Stillwell executives knew that they couldn't push the Janus prima donnas too hard, because there was likely to be a mass uprising.....Therefore, for the past two years, Stilwell has pretty much left Janus alone.....Starting in January, Janus fund managers will have the structure they've always wanted, and Stilwell shareholders will expect results.....If the Janus fund managers don't quickly generate better investment numbers, new-CEO Whiston and his friendly management team are going to face enormous pressure to make the kind of changes that Stilwell never could.....For that reason, we think manager changes at the Janus funds are now more likely than ever.
* The nine Berger funds that will disappear or undergo management changes are: Growth, Large Cap Growth, Mid Cap Growth, Small Company Growth, Balanced, International, International CORE, International Equity, and Information Technology
** The four subadvised Berger funds are: Small Cap Value, Mid Cap Value, Large Cap Value, Small Cap Value II


[Still to be determined: Did Hayes know about Janus' timing arrangement before she left?]

[May 2003]

	Former Iraqi Minister of Information Mohammed Saeed al-Sahhaf makes his first appearance as head of public relations for the Janus Funds:
"I can say, and I am responsible for what I am saying, that the retirement of Helen Young Hayes will have no effect on Janus."

Well, Janus can spin the news all it wants, and the company certainly has hired a pro in Mr. Sahhaf.....But the fact remains: The retirement of Helen Young Hayes, announced in mid-April, is a huge blow for Janus and its funds.....Here's what happened at Janus last month...where things stand now...what to look for...and our two cents worth on what it all means:

• Hayes resigned as the firm's chief investment officer, and she also resigned as manager of Janus Worldwide and Janus Overseas (including the "Adviser" and "Aspen" versions of those funds). Hayes will step down on June 16, but she has promised to stay around until year-end as an "advisor" to the new management teams. And what happens after that? According to the official line, Hayes is "retiring from the asset management business."
  
  
• Laurence Chang, who has co-managed Janus Worldwide since September 1999, will take over as lead manager, assisted by Doug Kirkpatrick. Brent Lynn, co-manager of Janus Overseas since January 2001, will take over the top spot at that fund, assisted by Garth Yettick.
  
  
• What's that? You say you've never heard of these new managers? Well, we barely have, and that's the point. Hayes was the experienced manager, the public face of Janus, and even though the recent performance of her funds has been poor, there was some reason to believe that she could lead them back to their former glory. New managers Chang and Lynn seem almost interchangeable, the Rosencrantz and Guildenstern of the mutual fund industry, and there's nothing particular in their backgrounds that inspires confidence. If you own shares of these funds, now might be a good time to reevaluate your holdings.
  
  
• According to a Janus spokesperson, Hayes is retiring for lifestyle reasons. She likes to read, but has barely had time to finish one book in the past year. Hayes also likes to compete in triathlons, but hasn't been able to do so for the past four years.* The problem with these explanations is that Hayes almost certainly could have adjusted her work load any way she wanted, and Janus would have gladly gone along. She could have dropped her fund responsibilities, given up her investment officer role, gone to a part-time schedule, asked for a larger support staff, taken several months off, or negotiated almost any concession that would have kept her on staff and in the public eye. Also, if Hayes thought that the market was going to turn in her favor, you'd think she would have held on out of professional pride, and the chance for her management skills to be vindicated. This looks like a case where Hayes didn't see a market turnaround any time soon, and was simply fed up with Janus. She wanted out, period.
  
  
• Why was Hayes fed up with Janus? One possibility is new and inexperienced CEO Mark Whiston, who's under pressure from outside shareholders to cut manager salaries and fire underperformers. Hayes may have seen this coming, and didn't want to be a part of it. Or, perhaps Hayes and Whiston just didn't get along, or Hayes didn't have confidence in Whiston's ability to lead the company in this difficult time. Another issue is publicity. As a public company no longer under the Stilwell umbrella (remember, this is what the brain trust wanted), Janus is under intense financial scrutiny, and the largest Janus shareholder (Highfields Capital Management Group) has been loudly and publicly complaining about the lack of salary information provided by Janus in its recent SEC filings. In particular, Highfields noted that Janus failed to disclose the compensation of Helen Young Hayes. Exactly one week after Highfields put Janus (and Hayes) on the salary hot seat, Hayes resigned.
  
  
• So, what's in store for Janus in the near future? We'd keep an eye on two people: Scott Schoelzel, and the replacement for Hayes. Schoelzel is the last senior manager at Janus, and a vocal I'm-not-going-anywhere kind of guy. If (when?) he bails, all bets are off. Also, Janus needs to find a suitable replacement for Hayes as chief investment officer, and here's where things could get messy. A big-name hire, with a commensurately large ego, is likely to have some fairly definite ideas about how Janus should be run, and that person runs the risk of further disrupting an already shaky Janus culture. A no-name hire probably won't have the clout or prestige to control this difficult firm, and an inside hire signals that Janus has given up on changing its culture, which means that you can probably kiss Janus goodbye as an independent fund company. Any way Janus turns, it's going to be a lot more difficult crawling out than sliding into the hole in the first place.

* "Top fund manager at Janus to retire," Aldo Svaldi, denverpost.com, April 18, 2003; Also: "More turmoil shakes Janus family," Jonathan Burton, cbs.marketwatch.com, April 21, 2003


[Janus lays another egg]

[June 2003] Undeterred by unseemliness, and obviously beyond embarrassment, Janus is one of the first major fund companies to announce that it will apply for restitution from the settlement distribution fund..... Janus has always made a big deal about the quality of its in-house research, as well as the brilliance of its in-house analysts and managers.....Somewhere along the line, Janus will probably have to explain how and why its talented analysts were led so badly astray by mere investment-bank research.


Wait! The explanation has already begun!.....A document recently obtained by FundAlarm appears to be a copy of the application that Janus has filed with the settlement fund administrator, seeking to recover money that the firm lost due to bad third-party research.....According to the application, Janus is seeking restitution of $500 million, which is more than the entire settlement fund.....But that's not the only thing that caught our eye.....This is a tough application, and it won't be easy for Janus (or any other fund manager) to grab a piece of the restitution pie:


And then...the timing scandal...