Janus Capital Group Inc. is looking to develop its large-cap value capabilities as the Denver fund company known for its growth products continues to report outflows and lower revenues.
Gary Black, Janus' president and chief investment officer, said Wednesday that the company must round out its products in order to increase distribution. Value products account for 8% of its portfolio mix, and growth and blend products 50% of the $132.2 billion Janus said it had under management at March 31.
"Value and growth take turns working, and … when value is in favor we don't have a great platform when investors are looking for a safe harbor," he said. "This is a high priority for us to get this done."
Mr. Black said Janus is not looking for any big deals because, he said, "they don't work." Instead, Janus will look to hire a value team from another company. "We are looking, but we want to be disciplined about what we have to pay," he said. "We don't want to overspend for value."
Janus remains confident that, in time, the growth strategy will rebound and begin to outperform value, Mr. Black said, but the past three years have been difficult for Janus. Value funds have outperformed growth portfolios by 1,300 basis points industrywide in the past three years, the company said, including 400 basis points in the first quarter.
"Flows follow performance," he said, "and over the last five years flows have gone to value." "Value has won for the last five calendar years in a row."
The strong value flows have hurt growth managers like Janus and Putnam Investments. Data from Financial Research Corp., a Boston company that tracks mutual fund flows, show Janus with $3.67 billion of outflows in the first two months of this year and $27.1 billion last year from its long-term funds.
The company reported Wednesday that assets under management fell to $132 billion at March 31, from $148.4 billion 12 months before. The company said it returned to profit in the first quarter as a drop in expenses helped offset lower asset management revenue.
Quarterly net income was $19.6 million, compared to a $22.1 million loss the year earlier. Revenue from investment management and servicing fees slid 14%, to $216 million, and operating expenses fell 30%, to $171.6 million.
Steven Scheid, Janus' chairman and chief executive officer, said it needs to continue being creative to restore fund inflows. The company has changed its advertising strategy, he said, to cut back television ads and increase print spending.
"We want to shift our ad dollars to put more foot soldiers on the ground because we hope that it will help our net flows," he said.
Janus plans to do some direct marketing, Mr. Scheid said, and will go to Web-based rather than brand advertising. "We are developing more leads through Web advertising than anywhere else," he said. "… As things start growing and margins start expanding, we will evaluate more brand advertising from there."
