Thomas Easton (Forbes, Aug. 23, 1999) and Dr. Paul Farrell (CBS MarketWatch, Sept. 8, 1999) both write about this fund family named after the ancient two-faced Italian god who presides over doors and gates, and over beginnings and endings. Both of their articles are single-minded, however, in their praise and admiration for Janus --- indeed, for Forbes it is the cover story: "Janus, how it became the hot fund family" under a photo of CEO Tom Bailey.

True enough, Janus, with its (now) 19 stock funds, beat all other fund families in 10-year asset-weighted compound annual return, namely 20.4% (for comparison, Fidelity comes in 3^rd with 18.1%.) "Can this money machine go on forever?" asks Forbes, hinting that the various funds are mere cogs in one mechanism. Farrell is more direct. According to him, you could just select funds by throwing darts at the Janus list. Really?

Let’s just consider it a minute. This writer would argue that there may be compelling differences among the various Janus stock funds, that many inverstors (for example, retirees, or others with short to intermediate time frames) should not ignore. Farrell asks: what is Janus’ secret? And Forbes answers that Bailey grasped the corporate economic spirit of the 1990’s, namely that ‘winners take all.’ Therefore he stayed with the winning growth companies, even as they went from 15 to 40 times earnings and higher. But are all his funds alike in their valuation and volatility? A glance at the table below will show not.

(Note: 3-yr. data through 8/31/99 from Morningstar)

While none can be regarded as ‘value’ funds, Special Situations has a decidedly less exuberant P/E than Global Technology or Twenty. Judging from their P/B ratios, the assets of Janus Twenty Fund are more than twice as expensive as those of Special Situations or the J.Overseas Fund. Looking at their standard deviations, the J. Balanced Fund is about half as volatile as Twenty, Mercury, or Olympus. Their betas corroborate this. The Sharpe Ratio winners (for volatility-adjusted performance) are: Twenty and the Balanced Fund; the loser: J.Venture Fund (incidentally the fund with the lowest median market capitalization, 1.1 Billion, among those analyzed.)

For retirees and some others adamant to join the ‘hot fund family’, buying funds with P/E’s less than 40, P/B’s less than 10, Standard Deviations under 30, Sharpe Ratios over 1, and/or Beta’s under 1 might not be the worst of investment strategies , particularly if the funds you select had low inter-correlations with each other(of which see below.)

Another way to examine the question whether all Janus equity funds are really only one, is to look at the intercorrelation coefficients (r’s) of each fund with every other. When we do this for the 14 funds given above, we discover that some are more highly correlated (that is, their NAV’s zig and zag in close synchrony) than others. Correlation coefficients can vary from –1.00, through zero, to +1.00. When r=0, there is absolutely no relationship between two funds. As r approaches +1 (or –1), the two funds may be thought of as more and more alike (or more and more opposite.) When r= or>.90 (or -.90 for that matter), the correlation may be thought of as " very strong". Consider the following table; it’s worth the effort.

(Note: Based on One-yr. data to 9/17/99 from Investor’s FastTrack)

Here we see that, using the number of "very strong" correlations (Column 2) as the indicator, Mercury and Olympus are the most highly related funds to the group as a whole (8 r’s of .90 or higher). The most different or distinctive, with this measure, is Global Life Sciences which has a very strong correlation with none of the others, closely followed by: Overseas, Venture, and Worldwide.

In Column 3, we see that there are two sets of almost identical twins: Balanced and Equity Income (r=.99), and Janus and Growth & Income (r=.98). It makes little sense to own both twins of a set.

In Column 4, we note that Janus Overseas Fund is very distinctive from many of the others (as in Column 2), having the lowest correlation coefficients with 12 of the others. All the r’s in Col. 4 would generally be considered "low to moderate". It may be worth noting that since Worldwide is least like Global Life Sciences (r=.71), the ‘Life Sciences’ specialty would appear to be more potent than the geographic descriptor of ‘Global’.

Column 5 indicates for each fund the next least like it (after that in Col. 4.) The distinctiveness of Janus Global Life Sciences Fund is reasserted. If you want to own several Janus funds, this table allows you to do some rational asset allocation

What about the correlation of each of these funds with the S&P 500? The most closely related to the index is Growth & Income (r=.92); the least related are: Overseas and Venture (r=.71).

We, thus, respectfully, disagree with Messrs. Easton and Farrell. The numbers above suggest to this writer the following conclusions:

1. All the Janus equity funds we analyzed are not one and the same.

1. The highest average P/E fund is 46.7% greater than the lowest.
2. The highest P/B fund is more than twice as high as the lowest.
3. The funds differ in their volatility by a factor of 1:2.1.
4. The highest Sharpe ratio is double the lowest.
5. The highest beta fund is 71% more market sensitive than the lowest

1. The 14 funds are not equally correlated to all others. Their inter-relationships range from a "modest" to "very strong".
2. The funds are not alike in their correlation with the S&P 500, the relationships ranging from "moderate" to "very strong".
3. Janus investors, especially those in the second half century of their lives, may want to draw some implications from these data to their investment decisions. This would be particularly apt if that Italian god were trying to tell us that we’re closer to the end of the 90’s bull market than its beginning.