Janus: What Direction is the Firm Headed?
Janus Capital is making waves in 2014 as it tries to climb toward the top of the asset management industry mountain.
"They are definitely increasing their profile and are trying to build out a full product lineup," says Steven Miyao, CEO and founder of research firm kasina. "They have heightened their profile with financial advisors."
Miyao says the Denver-based firm has long been known for its equity offerings and the addition of "Bond King" Bill Gross from Pimco in late September enhances its credibility in the fixed income space with the advisor and investor communities. Miyao adds that acquiring Darien, Conn.-based ETF product provider VelocityShares also helps increase Janus' ETF offerings, with its product diversity now rivaling longtime asset management giants BlackRock and Invesco. He also credits the Janus' new head of U.S. distribution Drew Elder, who was promoted to the role last January, for helping enhance the firm's relationship with advisors.
Gross's Janus Global Unconstrained Bond Fund received $66.4 million in client deposits for September, Morningstar data shows. Flow data for October will not be available until November, according to Morningstar.
Janus shined during the dotcom boom of the late 1990s, but when the Internet bubble burst, it struggled to regain its form. At its height, Janus had $325 billion in assets under management on March 31, 2000, but that figure was down to $174.4 billion for its 2014 third quarter earnings released this past Thursday. The firm had also faced 17 straight quarters of client withdrawals prior to the hiring of Gross.
Miyao says it is vital for asset managers not to rely on being known for one product as Janus experienced when it came to equities. A versatile fund platform allows firms to withstand potential downturns that can occur with different sectors, he adds.
"It is difficult to maintain when you are known for one core product," Miyao says. "You have to have scale in order to compete."
BOOM TO ETF INDUSTRY
Janus acquiring VelocityShares, a deal that still needs necessary regulatory approval, marked its first entry into the $1.8 trillion ETF industry. Janus CEO Dick Weill said in a statement announcing the acquisition that the move would help the firm "work with the growing segment of financial advisors and institutions focused on these instruments." The fund company first filed an application with the SEC four years ago seeking approval to launch ETFs.
"It makes sense for Janus to go after the ETF market since that is where the asset flows are," says David Nadig, chief investment officer at San Francisco-based ETF.com. "They are bringing on in-house expertise in this area with VelocityShares."
Noah Hamman, founder and CEO of Bethesda, Md.-based AdvisorShares, says a larger manager like Janus focusing on ETFs will be a positive for the industry since it will mean more resources going toward educating advisors about how the products work.
"We like to see the bigger more established firms get into the ETF space," says Hamman, who founded AdvisorShares in 2008 with the firm then launching its first ETF a year later. "There is so much room for growth in the ETF space."
Weil was not available for comment on the recent company moves, but the firm issued a statement saying in part that its "strategy of intelligent diversification centered on the acquisition of sophisticated, proven talent and the development of innovative product offerings has received positive feedback from U.S. Intermediary and Institutional distribution channels."
JANUS ON ADVISORS' RADAR
The aggressive late 2014 moves by Janus have gotten the attention of many financial advisors, especially ones who had holdings with Gross's Pimco fund. Nicholas Atkeson, co-founder of San Francisco-based Delta Investment Management, has assets at Pimco and is considering Gross's Janus fund for client accounts. He tracks the fund's performance closely on his computer and says many other advisors have done the same since the fund manager legend's arrival.
"Bill Gross is a big name and to add him to Janus is going to give them a lot of attention," says Atkeson.
Janus does expect an increase in the ratio of compensation expenses to revenue - 39.6% in Q3 - following Gross's hire, a spokesperson said.
However, Nadig forsees another move for Janus. "I think there is another chapter we haven't seen yet. They have an opportunity to make a real name for themselves."