Janus Capital Group's (JNS) net income fell in the third quarter as the Denver money manager recorded a charge on the expected sale of its printing business. But the company recorded a slight increase in earnings on continuing operations as assets under management rose despite heavy outflows at its Intech subsidiary.
Janus reported third-quarter net income from continuing operations of $50.8 million, or 29 cents per diluted share, compared with net income from continuing operations of $51.6 million, or 28 cents per diluted share, in the second quarter 2007.
The figures exclude a charge of 21 cents a diluted share related to the planned sale of Janus' printing business, Rapid Solutions Group.
Janus' assets under management rose 9.1% during the third quarter to $208.0 billion. About half of the increase, or $8.6 billion, came from market appreciation and fund performance, with the rest coming from net new money from clients. But the bulk of the new money, or $8.1 billion, went into the firm's money market funds. Its long-term stocks and bond funds pulled in just $700 million of new money, down sharply from $1.5 billion in the second quarter.
Money market funds charge relatively low fees, generating smaller profits for the firm than its long-term stock and bond fund.
Investors actually pulled a net $2.2 billion out of products managed by Janus' Intech subsidiary.
Chief executive Gary Black emphasized during Janus' conference call that the company has a "deep bench" of portfolio managers and has taken steps to minimize future turnover.
He was addressing concerns about the departure of two key investment professionals. Last week Janus announced the departure of David Corkins, portfolio manager of
Janus Adviser Large Cap Growth Fund and
Janus Aspen Large Cap Growth portfolio.
That followed the news in August that Scott Schoelzel, portfolio manager of
Janus Twenty fund,
Janus Adviser Forty and
Janus Aspen Forty, would depart at the end of the year.
"Losing investment talent is never easy," remarked Black. "That said, we have a very deep bench, and we have the utmost confidence in our investment teams' ability to continue to deliver for our clients and our shareholders."
Effective Nov. 1, Corkins will be succeed by Jonathan Coleman, who currently heads
Janus Enterprise fund and related portfolios. Brian Demain, described by the company as a Coleman "protégé," will take over management of Enterprise.
Schoelzel will conclude his stint at Janus by transitioning his funds to Ron Sachs, manager of
Janus Orion. John Eisinger, Janus equity research analyst for
Janus Research, will assume leadership of Orion.
Black pointed to Janus' track record at nurturing talent from within, noting that 16 of the firm's 19 portfolio managers came up as analysts at the company. "I think people realize that that we have a history with developing analysts into great portfolio managers. People understand that we have a repeatable process of analyst development, we have a repeatable investment process, and we think we will have repeatable success at delivering strong results."
The CEO added that Janus has altered its compensation process to "more closely align" the interests of the company's portfolio managers and its clients. The new strategy, which ties overall compensation to the firm's performance, intends to foster consistent long-term fund performance over three- and five-year periods.
"In some cases that can increase compensation for an individual," Black said. "So far in 2007, our average portfolio manager compensation is up sharply, given that we've had strong performance, given that we've had strong markets and had strong flows."
"Turnover is a reality of this business," Black said. "We could have additional turnover. Hopefully we don't."