NEW YORK ( TheStreet) --Its performance is mediocre, its clients are fleeing, and yet its shares are up 19.53% over the past month.
The company in question is Janus Capital Group (JNS), shares of which got a big pop following the announcement of a major investment by Japan's Dai-ichi Life Insurance, but it could easily have been a host of other middling active money managers.
Janus has seen steady outflows as investors increasingly shift to index-oriented money managers like Vanguard Group, which charge lower fees. Two of Janus' largest funds - Perkins Mid Cap Value and Overseas funds - "have posted ongoing redemptions for the past 13-15 months," according to JPMorgan, which sees "risk of accelerated redemptions based on the duration of poor relative performance for each fund." Fewer than 20% of Janus's equity mutual fund assets under management are in the top 50% in terms of performance over the past three years, according to Sandler O'Neill. Janus's shares are down 70% over the past five years.
Still, Janus was not about to give away the store in striking its deal with Dai-ichi. The life insurer will have an option to buy up to 14 million shares at $10.25--a more than 33% premium to Janus's closing price ahead of the deal's announcement--over the next year.It is hard to believe Dai-ichi will have to pay that much. Analysts raised price targets following the announcement, and at least one--Sandler O'Neill's Michael Kim, upgraded his recommendation to hold from sell, but they remained pessimistic about Janus's ability to reverse outflows unless it can performance around. Dai-ichi will give Janus access to Japanese markets, meaning the deal provides more than just a large committed shareholder. Still, a partnership with a far-off partner from a vastly different culture hardly seems like the best way to turn around a company that cannot perform in its home market. But turning around performance is far from a sure bet, and skepticism about active money management abounds--so even if Janus can earn a couple of percentage points more, it isn't clear how much that will move the needle in drawing in new business. Luring in a clueless foreign buyer seems like a safer way to boost the share price--except that it is rooted in cynicism and short-termism. Disregard any talk of access to new markets and strategic global partnerships. It seems unlikely this arrangement will end well. -- Written by Dan Freed in New York. Follow this writer on Twitter.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV