Janus funds are on a losing streak, but parent Stilwell Financial ( SV) is dangling an equity carrot to keep the managers who made it happen on board.

Over the next two months about 180 Janus employees will receive a cumulative 5% stake in the Denver firm, with most going to its 65-member investment team. An additional 1% Janus Capital stake will be divvied out in annual grants tied to performance targets. While the majority of Janus' stock funds still have enviable long-term track records, their tech-heavy portfolios put them in the crosshairs of the Nasdaq's collapse over the past two years.

The move is an effort to appease restive Janus employees, who have long chafed at being stuck under the Stilwell umbrella along with less high-faluting outfits like the Berger funds. Industry observers have often speculated that the chill between Janus and Stilwell might spur an exodus by the firm's celebrated investment staff, which includes high-profile growth managers like Helen Young Hayes ( ( JAWWX) Janus Worldwide ), Warren Lammert ( ( JAMRX) Janus Mercury ) and Scott Schoelzel ( ( JAVLX) Janus Twenty ).

The initial 5% equity grant will vest after seven years; the annual grants will vest after five years, though both vesting schedules will accelerate if Janus and its funds hit unspecified performance targets, according to Stilwell's statement. Employees will be able to sell their vested shares back to Janus or Stilwell twice each year, and the shares will be valued by a third-party adviser.

The annual equity grants also include options to buy Stilwell shares, which represent ownership in Janus as well as humbler ventures like Berger funds and recordkeeper DST Systems. All three firms were owned by railroad concern Kansas City Southern ( KSU) before being spun out as Stilwell in July 2000.

Janus founder and CEO Tom Bailey had a public dust-up with Stilwell management when Janus wasn't spun out on its own. Over the past year he and other Janus brass have steadily reduced their stakes in Janus Capital. Of course, the issue of aligning managers' interests with those of fundholders and shareholders has only gained more prominence in the wake of the Enron debacle. Prior to this grant, Janus was 98% owned by Stillwell.

Most of Janus' stock funds sharply trailed their average peer in 2000 and 2001, thanks to big bets on the tech, media and telecom sectors. The once-highflying Janus Twenty fund, for instance, sports a 10% annual loss over the past three years. That trails more than 80% of its large-cap growth peers, according to Morningstar. On average, Janus' domestic stock funds fell 16% and 20% in 2000 and 2001, respectively. They trailed the S&P 500 by more than 6 percentage points each year, though more than 80% of the firms U.S. stock funds beat their average peer over the past five years.
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 imcdonald@thestreet.com, but he cannot give specific financial advice.