Sept. 3, 2002 — Stilwell Financial (SV) plans to merge its Janus Capital Corp. mutual-fund subsidiary into the company and adopt Janus Capital Management Inc. (JCM) as its new brand name.
Insider and 11-year Janus veteran Mark Whiston, who currently serves as Janus’ president of retail and institutional services, will become chief executive officer and vice chairman of the merged company on December 31, the expected closing date of the merger.
The changes come as Janus’ equity funds have almost uniformly posted heavy losses in 2002, with some funds plunging as much as 35% to 40% after outperforming in the 1990s.
As previously reported, Tom Bailey stepped down as chief executive of Janus Capital Management on July 1 with no named successor.
Landon H. Rowland, current president, chief executive officer and chairman of Stilwell Financial, will become non-executive chairman of the board until Jan. 1, 2004, and will continue as a director for one year thereafter. It is expected that Whiston will be appointed chairman on Jan. 1, 2004.
In addition, Helen Young Hayes, Janus’ managing director of investments, and Jim Craig, Janus’ former chief investment officer, will join the board by Jan. 1, 2003. Craig left Janus in September 2000 to run a charitable foundation with his wife. It is also expected that three new independent members will be appointed to the Janus board by Dec. 31, 2002, replacing three current directors who intend to retire.
Stillwell noted that the proposed reorganization will result in annual savings of approximately $40 million, including the elimination of about 130 to 140 jobs. Further details about jobs being cut were not available. The merged entity will market and distribute its investment products globally under the `Janus’ brand name.
JCM will control the strategic direction of the Janus funds as well as Stilwell’s other existing investment management subsidiaries, comprising Berger Financial Group LLC, which also owns Enhanced Investment Technologies LLC and Bay Isle Financial LLC; and U.K.-based Nelson Money Managers plc. Collectively, these firms manage approximately $150 billion in assets. The current Janus fund complex accounts for about $135 billion of those assets, principally in large-cap growth equity products.
Berger, which presently has about $14 billion in assets under management, including the Berger funds family, will continue to operate from its Denver headquarters. According to Shelley Peterson, a spokeswoman for Janus, “the Berger funds will presently retain the `Berger’ name. However, management at Janus is proposing that Berger’s growth-style mutual funds eventually be merged into similar Janus funds. But this would have to approved by Berger funds’ board of trustees and shareholders.”
Stilwell currently owns approximately 92% of Janus Capital and 87% of Berger Financial.
JCM will also have 33% ownership of DST Systems Inc. (DST) and 81% ownership of Nelson. Stillwell noted that management will “assess strategic alternatives for these investments during the coming months.”
“This sounds like window dressing to me,” said Louis Harvey, president of Dalbar Inc., a Boston-based mutual fund consultant. “Among the large mutual-fund companies, Janus has unquestionably suffered the most severe loss in assets the past couple of years,” he noted. “They’ve lost a ton of assets. As an example of their troubles, back in July 2001 Janus came out and said that they had faith in Enron and that it would be a good stock.”
Stillwell, which reported assets under management of about $150 billion at the end of August, reported $161.5 billion in assets under management at June 30, 2002, $190.5 billion at March 30; $192.2 billion at Dec. 31, 2001; and $220.1 billion at June 30, 2001.
Though seven of the company’s funds, including its flagship Janus Fund (JANSX), and the Janus Twenty Fund (JAVLX), are still not accepting new investors, Janus Olympus Fund (JAOLX) reopened to new investors in August. The portfolio was closed in May 2000, along with two other Janus funds, to keep from getting too large. Assets had shrunk to $2.2 billion on July 31 from $7.8 billion at the end of May 2000, Janus said previously, noting that the “vast majority” of the decline was due to stock market depreciation.
Harvey added that “the shine has somewhat gone off the `Janus’ brand name. But with this reorganization, by putting the `Janus’ name at the forefront, they are clearly going to try to re-establish the credibility of the brand name.”