Viewpoint: Signs the Salad Days Are Over at Janus - TheStreet

Janus is the Roman god of good beginnings. Today, the name has a different meaning for U.S. investors: High growth. Top talent. Top performance. Cash machine.

Ka-ching!

Although the 1990s were

the

Janus years, recent developments could signal the end of its reign of glory (or reign of terror, if you work at a competing fund company). So, with apologies to David Letterman, here are:

The Top 10 Signs the Golden Years Are Behind Janus:

10. Jim Craig skipped out.

The former manager of the flagship

(JANSX)

Janus fund recently handed in walking papers for supposedly non-Janus reasons. Maybe. Other possible explanations for his departure could include bitter aftereffects of Janus' spinoff from

Kansas City Southern

(KSU) - Get Report

(Janus execs opposed being lumped with other asset management firms in

Stilwell Financial

(SV)

, investment philosophy issues arising from the recent turmoil in the markets, a lack of equity in Janus (an empire he helped build) and a general feeling that the good times are over. Any way you slice it, this is bad news.

9. Bear market? What's that?

Most Janus managers were out hunting for a prom date in 1987, the last significant market wipeout. Ron Sachs, manager of Janus'

(JORNX) - Get Report

Orion fund, was recently quoted in

SmartMoney

magazine describing the environment at Janus after the April

Nasdaq

crash: "It was a lot less fun. You got used to having all your stocks go up, and you'd be able to go to a manager and say, 'Buy this because it's worth more and because this is going to happen,' and it would, and you'd feel smart and whatever valuation metric you'd put on it would prove right." That's comforting.

8. Funds are too fat.

Janus closes funds when they get too big to manage and has closed more funds to new investors in the past couple of years than most fund families launch. Excess assets are a leading cause of poor performance, and most Janus funds are well beyond the point where a diet is needed.

7. Stock positions are too large.

Janus discovered long ago that concentrated portfolios with 20 to 50 stocks are superior to overly diversified funds like

(FMAGX) - Get Report

Fidelity Magellan (although riskier if owned alone). However, because Janus funds have grown so fast, the concentrated Janus style has led to positions that would be difficult to change if the need arises. Janus, through its many large funds, collectively owned around 90 million shares of

Comcast

(CMCSK)

recently -- more than 10% of all shares outstanding, and almost a month's worth of average trading volume. Imagine trying to move that in a down market.

6. They're starting to believe their own hype.

The Janus philosophy has evolved into a cult-like religion and is taken a little too seriously back at headquarters. In Hollywood, this problem is known as believing your own press; in investment management it's believing your own performance. Take this sample from the company Web site: "A unique approach, it's true. Not bound by the conventions of Wall Street, but a place where the thinking is fresh. A place away from the crowd. A place called Denver." Give me a break.

5. The insider edge has been dulled.

The

Securities and Exchange Commission's

new Regulation FD, which tightens rules on selective disclosure by public companies, takes away some advantages large institutions have had in stock research. As any consumer of Janus advertising knows, Janus goes the extra mile in stock research. This includes getting top-level executives to talk candidly, an advantage small investors, including small fund families, don't have. Soon Janus won't have it either.

4. Same funds, different name.

As recent market performance and annual reports seem to indicate, most Janus equity funds hold the same stocks. At Janus, the fund managers act as one, sharing good ideas that often become holdings in several funds. It seems like almost every equity fund at Janus owns a little Comcast,

Nokia

(NOK) - Get Report

and

JDS Uniphase

(JDSU)

. So much for diversification.

3. Yesterday's investment style.

Janus funds have performed so well in recent years because (no insight here) the stocks in the funds have been rockets. Janus is at its best when buying large-cap tech growth stocks. For Janus equity funds to perform as well in the next three years as they have the past three, these stocks will have to continue an ascent that is all but impossible. Is JDS Uniphase going to have a $500 billion market cap? Nokia, $1 trillion?

2. Inflows are slowing.

It may be a little early for a clear trend to emerge, but it seems as if inflows into Janus funds have slowed from their breakneck levels of the past year. Janus has dominated the mutual-fund business, collecting about $500 million in new assets a day -- about half of all flows into equity mutual funds. These inflows help lift the prices of stocks in the funds because they require Janus to buy more and more. With inflows slowing, Janus' stock picks may not be able to continue their meteoric rise. Uglier still, if the flows reverse, we could see selling pressure push down the prices of Janus' favorite stocks.

1. The ticking tax time bomb.

One problem a successful fund family has to deal with is unrealized capital gains. If shareholders begin exiting Janus funds in large numbers, Janus managers will have to sell shares, turning those unrealized gains into taxable gains that would have to be distributed to all remaining Janus shareholders. This is the dark side of the "mutual" in mutual fund, and could penalize recent investors who have not experienced the golden years at Janus.

Janus is the most successful no-load fund family of all time. (Janus is more profitable than

Vanguard

and

Fidelity

is primarily a load group.) For good reason. Janus is an innovator in investment style and marketing, and has rewarded shareholders with real returns, not just performance figures achieved when hardly anyone was in the fund. But the pillars of Janus' temple are starting to crumble, and all that is left standing is a false idol in the form of a brand. Brands matter with perfume, clothing and cars, not with mutual fund selection, where worshiping false idols can have dire consequences. Call me a heretic, but it may be time to find a new god.

Jonas Max Ferris is the CEO and co-founder of

MaxFunds.com, a Web site that provides analysis of mutual funds with a spotlight on new and undiscovered funds. He welcomes your feedback at

personalfinance@thestreet.com.