Janus' $150 Billion Problem

Investors in Janus(JNS Quote) funds who have stuck with the firm through thick and thin have been repaid with the double blow of injury and now insult.

First, Janus' dangerous concentration in tech and telecom companies resulted in brutal losses after the bubble burst in 2000. Second, as we learned Wednesday, Janus was allegedly among the bad apples that allowed hedge funds to reap huge profits through illegal arbitrage strategies with the funds, at the expense of the fund holders who remained invested in Janus after the bubble burst.

Here's what Janus did, according to the complaint filed by New York Attorney General Eliot Spitzer's office. In the spring of 2002, Janus gave hedge fund Canary Partners permission to time the Janus Mercury fund, in exchange for Canary's socking away money into a Janus money-market fund. Canary made big profits timing the Mercury fund at the expense of individual investors in the fund. When Canary sought to expand its market-timing capacity in Janus' offshore funds, an employee at the Denver-based fund shop sent concerned emails to Janus Interntional CEO Richard Garland about the volume of market activity. "We need to keep our funds clean," the emailer wrote to Garland. ...