Janus Capital Group Inc. ( JNS )

Q2 2010 Earnings Call Transcript

July 22, 2010 10:00 am ET


Dick Weil – CEO

Greg Frost – EVP and CFO


Cynthia Mayer – Bank of America/Merrill Lynch

Bill Katz – Citigroup

Jeff Hopson – Stifel Nicolaus & Company

Ken Worthington – JP Morgan

Robert Lee – Keefe, Bruyette & Woods

Marc Irizarry – Goldman Sachs

Mike Carrier – Deutsche Bank Securities

Michael Kim – Sandler O'Neill & Partners

Craig Siegenthaler – Credit Suisse

Roger Freeman – Barclays Capital

Roger Smith – Macquarie Research Equities

Jonathan McMillan [ph] – Susquehanna

Mac Sykes – Gabelli & Company



Good morning. My name is Sera, and I will be your conference facilitator today. I would like to welcome everyone to the Janus Capital Group, second 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 Investor Relations area of www.jenus.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 affects the operations, performance, business strategy, and results of Janus, and could cause actual results and experience 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 Web site www.janus.com, and on the SEC's Web site www.sec.gov.

Investors are cautioned not to place undue reliance on forward-looking statements, which speaks only as of the date on which they are made. Janus does not undertake to update such as 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 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.

Dick Weil

Thank you, Operator. Thank you everyone for your time today, and welcome to our second quarter 2010 conference call. Before we get started I would just like to call your attention to two changes in how we are making our presentation this quarter in order to help you better understand the company and align your understanding better with my own. We are focusing on investments styles in our presentation rather than legal distinctions.

We’ve combined flow and performance metrics for Janus Equity and for Perkins into a new classification called fundamental equity. And additionally, we’ve broken out fixed income separately as this is an area of particular focus for us going forward. INTECH disclosure remains the same, but tied with mathematical reflecting their investment strategy. We’ve included all the data provided in the past in the appendix for your convenience. So with that preamble, let's get going.

Janus Capital Group earned $0.17 in the second quarter 2010, flat versus the first quarter and up from $0.10 one year ago. Assets under management, as you saw in our release earlier this morning, ended the quarter at $147.2 billion, down 11% versus the end of the first quarter, largely in line with the US equity markets; US S&P was down almost 12% for the quarter. Net outflows for our Group in the quarter were $1.3 billion.

I would like to give you some context for these results. During the second quarter and really for a substantially longer period than that our equity investors have been fighting a really terrible market. As you all know, beginning in May, volatility shot up and equities fell sharply. The S&P fell, as I said earlier, approximately 12% on the quarter.

Active equity flows were suffering in comparison to both passive and fixed income. In the US mutual fund industry, for example, active equities saw $11 billion in outflows, while fixed income saw $62 billion in inflows and passive equity saw $32 billion inflows in the quarter.

Lastly in context, research activity remains down particularly for mathematical and quantitative strategies. Despite these challenges, I'm encouraged that we've made the important progress across a wide range of our initiatives. First and most importantly, mathematical equity strategies at our INTECH subsidiaries saw a much improved net outflow of $1.5 billion in Q2 compared to $4.3 billion in the first quarter.

INTECH’s mathematical approach is very much better than many of its quantitative peers with $2 billion of net inflows in the quarter driven largely by existing clients. We are encouraged by their inflows in the second quarter, but we also recognize that one quarter does not make a trend; they continue to face some very challenging industry circumstances.

I was also very pleased with our accelerating fixed income business. Second quarter net inflows of $1.2 billion brought our year-to-date flows to over $2 billion. We are seeing increasing interest and acceptance of Janus as a fixed income provider. We think we have lot to offer as a compliment to some of the larger BMS in that space.

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