Janus Capital Group (



Q3 2010 Earnings Conference Call

October 21, 2010 10:00 am ET


Richard Weil – Chief Executive Officer

Gregory Frost - Executive Vice President and Chief Financial Officer


Cynthia Mayer - Banc of America Merrill Lynch

Michael Kim - Sandler O'Neill

Jonathan Casteleyn - Susquehanna

Roger Freeman - Barclays Capital

Jeffrey Hopson - Stifel Nicolaus

Kenneth Worthington - JPMorgan

William Katz - Citigroup

Robert Lee - KBW

Michael Carrier - Deutsche Bank

Marc Irizarry - Goldman Sachs & Co.

Mark Lane - William Blair & Company



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» Janus Capital Group Inc. Q2 2010 Earnings Call Transcript
» Janus Capital Group Inc. Q1 2010 Earnings Call Transcript
» Janus Capital Group Inc. Q4 2009 Earnings Call Transcript
» Janus Capital Group, Inc. Q3 2009 Earnings Call Transcript

Good morning. My name is Sarah, and I will be your conference facilitator today. I would like to welcome everyone to the Janus Capital Group Third Quarter 2010 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. In the interest of time, questions will be limited to one initial and one follow-up question.

Before the Company begins, I would like to reference their standard legal disclaimer, which also accompanies the full slide presentation located in the Investors Relations area of janus.com.

Statements made in the presentation today may contain forward-looking information about management's plans, projections, expectations, strategic objectives, business prospects, anticipated financial results, anticipated results of litigation and regulatory proceedings and other similar matters.

A variety of factors, many of which are beyond the Company's control, affect the operations, performance, business strategy, and results of Janus, and could cause actual results and experiences to differ materially from the expectations and objectives expressed in their statements. These factors include, but are not limited to, the factors described in Janus's reports filed with the SEC, which are available on their website, www.janus.com, and on the SEC's website, www.sec.gov.

Investors are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date on which they are made.

Janus does not undertake to update such statements to reflect the impact of circumstances or events that arise after the date these statements were made. Investors should however consult any further disclosures that Janus may make in its reports filed with the SEC. Thank you.

Now it is my pleasure to introduce Dick Weil, Chief Executive Officer of Janus Capital Group. Mr. Weil, you may begin your conference.

Richard Weil

Thank you, operator. Welcome to everyone to the Janus Capital Group third quarter 2010 conference call. In the third quarter, Janus earned $0.18 a share. This amount was earned net of two offsetting items.

During the quarter, we experienced $0.05 of gain from tax reversals, and we also experienced $0.05 of expense from two administrative errors. Net of our action, no clients have been negatively affected.

Let me step out our normal process here for a moment to address these errors. Errors of this order of magnitude are completely unacceptable to me. They're unacceptable to our management and to every person in our firm. We don’t expect them to be acceptable to our equity owners either.

At this point, the errors look idiosyncratic and have not revealed any deeper systemic problem, but we’re taking nothing for granted. We simply must have processes and controls that catch the inevitable human errors and avoid outcomes like this.

We've just hired a new head of technology and operation, George Batejan, who started on Monday. George will be working with our head of risk management and our entire management team to look at our processes and controls across the firm to ensure that we've taken every possible step to avoid a repeat of this sort of unacceptable outcome.

I’ll turn it back to our more normal process here. Turning to flows, Janus third quarter total company long-term net flows were $2.9 billion outflows. As a fundamental in mathematical strategy, outflows more than offset fixed income inflows.

Fundamental equity had net outflows of $1.8 billion in the quarter, reflecting very slow sales over the summer and one significant client reallocation.

Candidly, the summer was a terrible environment for the equity markets inflows and we’re seeing some stronger equity returns here in the fall and we’re looking forward to operating under improved conditions.

While mathematical equity performance continued to improve for us, it’s not shown up yet in our mathematical equity flows. Third quarter net flows were $2.1 billion out compared to $1.5 billion out in the second quarter. The major difference quarter-on-quarter was we had some lumpy inflows in the second quarter that did not repeat in the third.

Our fixed income business continued to gain traction with $1 billion in net inflows, more than doubling the industry growth rate.

We’re making progress in our global, our institutional and our fixed income efforts, but we continue to face some strong industry headwinds particularly in large cap U.S. fundamental equities.

Generally, our long-term performance remains strong across the firm. However, a few key fundamental equity strategies are experiencing shorter-term challenging performance.

Performance in our mathematical equity strategies continued to improve with outperformance in the third quarter, driving 100% of mathematical strategies above benchmark on a one year basis at September 30, which is up from 42% at June 30, and up from 0% a year ago. We continue to develop our fixed income franchise. We're launching two key global credit strategies in the fourth quarter.

Despite slowing sales in the third quarter we continue to be well positioned in the advisory channel with gross sales up 27% year-to-date over the same period in 2009. We're gaining momentum in the institutional channel thanks in large part to our fixed income business and also related to global equities. In short, we are making progress with our strategic focus on more global and more income.

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