Armed with additional capital and operating under an interim chief executive, Janus Capital Group Inc. has a long climb ahead for a recovery.

At midyear the Denver fund company's assets under management stood at $132.6 billion, down from $330 billion in 2000. In the past five years it has improved fund performance and changed its distribution model from a retail-oriented model to a third-party approach, but analysts said it must short up its balance sheet and perhaps consider more drastic changes if it wants to regain assets.

Geoffrey Bobroff of Bobroff Consulting in East Greenwich, R.I., said Janus has a "tall order." "I am troubled if they think that they can regain prominence just through organic growth," he said. "The market isn't going to grow at the rate that it did in the 1990s. Growth must come through an acquisition or a combination."

Gregory Frost, Janus' senior vice president and chief financial officer, said the company does not plan any dramatic changes. He said it will to continue to invest in developing its third-party distribution to "create a better and bigger footprint" and continue to introduce products even after Tuesday's ouster of the executive — CEO Gary Black — who initiated that strategy. Black was replaced Tuesday by Tim Armour, a director of the company, on an interim basis.

"A lot of the things that Gary put in place, that strategy won't change overnight," Frost said in an interview Wednesday. "The firm is in good shape. Our fundamentals are strong and the board doesn't feel a dramatic change in strategy is going to occur at this point."

Frost said Janus' goal for the next five years is to widen distribution through third parties and "grow the firm" organically. "In markets like this, it is tough to grow, but we are confident that we are well positioned," he said.

Bobroff said Janus is in a difficult spot because investors are moving money into fixed-income products — and Janus is an equity manager. "Janus needs to consider going private so that they aren't driven by quarterly earnings," he said. "This way they can focus on their products rather than worrying about the common shareholder and the next quarterly report."

Other analysts said Janus may have to consider selling itself. Matt Snowling, an analyst at Friedman, Billings, Ramsey Group Inc.'s FBR Capital Markets Corp. who covers Janus, said rumors have been circulating for years that Janus was up for sale and "there may be some truth to it, but it takes a lot to get a deal done. There are plenty of assets up for sale on the cheap right now, but a lot of boards are wary of selling."

On Tuesday, Janus said its second-quarter net income fell 76% from a year earlier, to $15.8 million. It also announced a capital raise and tender offer, saying it intends to offer $150 million in common shares and $150 million in convertible senior notes and is offering to repurchase about $400 million of outstanding debt.

By raising additional capital, anus will be on "stronger footing to eliminate downside risk," Frost said. "We are not alone in this boat," he said. "Companies are taking a hard look at their balance sheet. This capital will help us create a manageable balance sheet."

Snowling said the new capital is a "big step" for Janus as it tries to "dig out" from its nearly $1 billion in debt. It has worked hard to sharpen performance and regain some stability by adding capital, he said, but it "has injected a lot of uncertainty with investors with this management change."

"Janus is going to have to demonstrate to customers that they have things under control and can improve from here on what Black has done," Snowling said.

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