Updated from 11:50 a.m. EDT
Founder Tom Bailey will sell his last Janus shares within four months, rekindling speculation that high-profile fund managers will flee the shop known for tech-heavy growth funds.
agreed Wednesday to buy Bailey's remaining 600,000 Janus shares for some $603 million. Bailey will stay on as the Denver fund shop's chairman and CEO, but will relinquish his right to appoint the majority of the Janus board. The firm's top fund managers issued a statement later Wednesday indicating they have no plans to leave.
"This is simply a prudent economic decision," Bailey said. "This transaction doesn't change our day-to-day business, and I have every intention of staying at Janus as CEO." The Janus shares are closely held, with some 98% of the company owned by Stilwell and the rest in the hands of employees. As of March 12, Bailey owned 60,857 Stilwell shares, valued now at around $1.3 million.
The high-profile move comes at an awkward time for investors holding Janus funds, as well as shares of parent Stilwell. Janus' powerful brand and reputation rests on the shoulders of a few money managers like Helen Young Hayes (
Overseas) and Scott Schoelzel (
Twenty). Ever since some Janus managers
chafed last July at being crowded under the Stilwell umbrella with the likes of Berger Funds and record-keeper DST Systems, critics have waited for the stars to bolt. Chief investment officer Jim Craig, for example,
did so last September.
In a way the sale is ironic since fund managers, including those at Janus, routinely say they prefer investing in companies whose management holds a significant amount of the stock.
In January Bailey sold half his Janus stake back to Stilwell for more than $600 million. Other top execs and fund managers
sold shares as well in the first quarter, though none sold shares along with Bailey this time around.
It's understandable if Bailey's sale rattles some Janus fund shareholders, who have seen tough times lately. Janus' tech-heavy stock funds rang up an average return north of 80% in 1999, pushing the firm to industry-leading inflows in 2000. But sales were so strong that Janus was forced to shutter several funds. Worse yet, much of the cash gusher came at the market's peak; since then, Janus funds have plunged along with the tech stocks they held dear. The average direct-sold Janus stock fund lost 40% of its value in the 12 months ended Sept. 1, according to Chicago fund tracker Morningstar.
Despite these losses and the closing to new investors of popular funds like Twenty, Global Technology and Worldwide, redemptions have been light. The firm's retail stock and bond fund assets dropped to $127 billion on July 31 from $204 billion a year earlier, according to Boston fund consultancy Financial Research. Most of that loss was attributable to investment losses, however: Redemptions outpaced investments by only $6 billion over that stretch.
The silver lining for Stilwell shareholders and Janus investors is that Stilwell could now use Bailey's shares to entice Janus stock pickers to stay aboard. And keep in mind that even if some do head for greener pastures, the firm didn't skip a beat in 1997 when top gun Tom Marsico left to start his own shop across town. Stilwell says Bailey's shares will be used to provide "meaningful share ownership throughout the Janus organization," though a Janus spokeswoman didn't offer details.
In a midday statement, nembers of Janus' executive investment committee said they had no intention of jumping ship. The committee comprises the five senior stock-fund managers: Schoelzel, Hayes, Blaine Rollins (Janus), Jim Goff (Enterprise) and Warren Lammert (Mercury).
"For the record, none of us is planning to leave Janus in the foreseeable future," the statement read. "The simple truth is, for us, there's no better place to work than Janus. Which is exactly why Janus' overall portfolio management retention speaks for itself: We've lost only three portfolio managers over the course of 30 years. No other company can match that."
Stilwell shares, down 56% over the past 12 months, rose 37 cents Wednesday morning to $20.28.
Ian McDonald writes daily for TheStreet.com. In keeping with TSC's editorial policy, he doesn't own or short individual stocks. He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to
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