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Portfolio > Mutual Funds

In Wake Of Scandal, ING Dropping Janus Funds

By Jim Connolly

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ING Partners, Inc.s board of directors announced that it is removing Janus Capital funds in the subaccounts of variable products offered by ING companies.

The announcement follows a statement from Janus Capital Group, Denver, on July 29 that a client intended to redeem approximately $5 billion in funds by year-end. No funds have yet been withdrawn, according to a Janus spokesperson.

Janus has about $129 billion of assets under management.

The news came as Janus announced on Aug. 18 that it had reached final settlements with the Securities and Exchange Commission, Attorneys General of New York and Colorado, and the Colorado Division of Securities related to frequent trading arrangements.

Among the reasons for the Hartford, Conn.-based ING boards decision, was a due diligence review, according to filings with the SEC. Filings of ING companies said concerns include changes in fund managers, performance and well-publicized investigations, claims and regulatory actions, and the corresponding negative publicity.

Other reasons cited in the filing include streamlining and standardizing the current array of funds offered through ING products as well as an effort to reduce the cost of ING products by reducing the number of funds offered in subaccounts.

Janus funds that are being replaced include: Janus Aspen Balanced Portfolio, Janus Aspen Mid Cap Growth Portfolio, and, Janus Aspen Worldwide Growth Portfolio. Both institutional and service shares are affected.

Funds that will be substituted include: ING Van Kampen Equity and Income Portfolio; ING T. Rowe Price Diversified Mid Cap Growth Portfolio; and ING Oppenheimer Global Portfolio.

The new subadvisors are: American Century Investment Management, Inc., Oppenheimer Funds, Inc.; and T. Rowe Price Associates, Inc.

Janus said the terms of its final agreement are in keeping with previously announced plans. Those plans include establishing a pool of $100 million to compensate investors who were adversely affected by frequent trading and other practices. Of that amount, $50 million is in the form of a civil penalty. In addition, Janus says it will make $1.2 million in other settlement-related payments required by Colorado. It also has agreed to reduce its management fees by approximately $25 million per year for the next 5 years.

In announcing the final settlement, Janus says it implemented several new measures, including: enhancing portfolio valuation techniques to discourage market timing; eliminating the use of third-party soft dollars, or using brokerage commissions to purchase research and services; implementing a 2% redemption fee on shares of certain funds liquidated within 90 days of purchase; and, increasing portfolio holdings disclosure to monthly from semi-annually. Janus is also appointing an independent chairman.

Reproduced from National Underwriter Edition, August 19, 2004. Copyright 2004 by The National Underwriter Company in the serial publication. All rights reserved.Copyright in this article as an independent work may be held by the author.

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