Janus Is Growing a Second Face -- and So Should You

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Like Nascar drivers tired of blowing out their engines, some Janus fund managers might be tinkering a bit under the hood.

Following a second tough year for the Denver firm's tech- and telecom-heavy growth funds, last week a quartet of Janus managers told reporters they're not changing the grass-roots research process they made popular in ads and Wall Street lore. But the funds' recent moves indicate that some managers are charting a less risky course as they put their portfolios together. The upshot for Janus shareholders: After the past three years' high highs and low lows, you might see a bit less of each going forward.

"In general the portfolios are a lot better diversified than they were in the past," says Christine Benz, the analyst who covers the Janus growth funds for Chicago research house Morningstar. "But investors should keep in mind that in their current positioning they won't be able to deliver the upside some investors are expecting. For the last 90 days tech has been hot, and these funds have been so-so."

She's right. Janus offers seven direct-sold, big-cap growth funds, the style it's best known for. Only one, JAOLXOlympus, is beating its average peer over the past 90 days, according to Morningstar. On average, the category is up 9% over that stretch, beating traditional tech fans like Janus (up 6.3%) and Mercury (up 6.7%). And the typically high-octane Enterprise fund is up just 2.5%, compared with a 7.7% gain for its average peer.

"When you look at Enterprise and Twenty, those funds were pretty aggressive, and I'd say they've really reined in their sector bets," says Benz.

The most recent portfolio data for Janus' direct-sold funds date back to April, but more recent numbers on the firm's Adviser family of funds illustrates a broader approach. At the end of July, portfolio manager Scott Schoelzel, manager of the Twenty fund, had 11% of the JGRTXAdviser Aggressive Growth fund in tech stocks, compared with a 34% average tech stake over the past three years, according to Morningstar. And Jim Goff, manager of the Enterprise fund, had 14% of the JARTXAdviser Capital Appreciation fund in tech stocks on July 31, compared with a 39% average tech bet over the past three years.

Shrinkage Many Janus funds are losing ground since the Nasdaq top
Janus Fund	Return Since Nasdaq Peak	1999 Return	Value of $10,000 Invested Jan. 1, 2000**
Mercury*	-59.2%	96.2%	$5,023
Twenty	-54.3	64.9	4,493
Worldwide	-50.6	64.4	5,896
Janus	-46	47.1	5,682
Growth & Income*	-33.2	51.2	7,072
S&P 500	-16.2	21	N/A
Nasdaq Composite	-59.3	85.6	N/A
Sources: Baseline/Thomson Financial. *Closed to new investors. **Assumes liquidation on Oct. 31.

"They took a little more conservative stance by rolling out more conservative funds, too," says Jim Folwell, a consultant with Boston-based consultancy Cerulli Associates. Over the past two years, the firm has rolled out two price-conscious value funds, Strategic Value and Global Value, as well as Janus 2. That fund is run by John Schreiber, who endorsed a conservative "growth at the right price" approach at last week's press briefing.

One reason for managers' less aggressive stance might simply be the past two years' pain.

Each of the firm's five biggest stock funds have lost more than a third of their value since the Nasdaq peaked last year, compared with a 16.2% fall for the S&P 500. And the past two years' pain has tarnished some of the funds' longer-term track records despite big gains in 1999. The Enterprise, Venture and Twenty funds all trail at least 70% of their peers over the past three years, though Venture does top the S&P 500 over that stretch.

A Troubled Trio Some Janus holders ask, Where's the brio?
Janus fund	YTD Return	Percentile Rank vs. Peers (1=Best, 100=Worst)	Three-Year Return	Percentile Rank vs. Peers (1=Best, 100=Worst)
JAENXEnterprise	-39.1%	94%	2.3%	81%
JAVTXVenture*	-15.5	66	7.8	73
JAVLXTwenty*	-27.5	78	-2.8	71
S&P 500	-6.5	N/A	4.3	N/A
Source: Morningstar. *Closed to new investors. Performance through Dec. 6.

Another reason why you might see the funds adopting a tamer stance is the firm's growing reliance on institutional investors and the adviser channel. Today, the majority of fund sales come through advisers and 401(k) plans, and traditional no-load firms such as Scudder, Invesco and Firsthand Funds are just the latest to shift their focus to advisers. Janus has most of its assets in instititutional and retirement accounts, implying a similar shift to those lucrative areas in which accounts tend to be bigger and trading tends to be less frequent.

"The whole industry is moving toward advisers, and Janus is doing that internally as well," says Benz. A Janus spokeswoman says the firm has no plans to launch share classes that carry sales charges or loads for the traditional broker channel, but brokers can sell the Adviser funds today through fee-based wrap accounts.

Following the Money Janus' parent pushing institutional and adviser sales
	Retail Direct Sales	Adviser-Sold and Institutional Sales
Oct. 25, 2001	28%	72%
2000	29	73
1999	35	65
1998	43	67
1997	50	50
Source: Stilwellfinancial.com

While institutions typically understand that styles routinely swing in and out of favor, the funds' recent volatility might have rattled some. And 401(k) investors might be shell-shocked after seeing their balances fall through the floor.

The bottom line isn't that these folks are changing their stripes, a charge they adamantly denied last week. Rather, some managers -- like most investors -- have emerged from the past two years' losses thinking that they should do some things differently. Now you need to decide if you agree.