This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration. Need a new registration confirmation email? Click here
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 - Get Report), 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