For Janus Olympian, feats turn into clay

For a while, it was one of Janus’ most promising mutual funds.

Under the direction of Claire Young, the Janus Olympus fund posted a 100.12% return in 1999, a showstopping performance that opened the floodgates to billions of dollars in fresh cash.

But for the past 12 months, the $4.9 billion fund has behaved like anything but an Olympian.

Like most growth fund managers, Ms. Young fell hard when the bottom fell out of the technology sector last year.

But an ill-timed move into stabler growth stocks and a few sizable positions in treacherous technology issues have compounded problems. The fund is underperforming almost all other large-cap growth funds. The fund also missed recent “minirallies” in such areas of the market as financial services and energy.

The results have been pitiful. In the nine months through January that the fund had been closed to new investors, it bled assets in all but two months. On the performance side, the fund fell 47.2% for the 52 weeks ended March 6 and ranked 469 out of 504 large-cap growth funds tracked by New York’s Lipper Inc.

“What is with Olympus?” lamented one investor recently on an Internet message board. “I know the market is having a tech meltdown, but this 50% downturn is killing my stomach … Which pharmaceutical company makes Rolaids?”

performance a puzzle

Those statements cut to the quick with Ms. Young, who took over the fund from Scott Schoelzel when he was promoted to Janus Twenty in August 1997. Until Janus Olympus, Ms. Young had been an analyst at Denver’s Janus Capital Corp.

Even she is baffled by her relative underperformance.

“This has been the toughest year I have had during my nine years at Janus,” says Ms. Young, the younger sister of Janus’ renowned international money manager Helen Young Hayes. “I really take to heart that my shareholders have given me their hard-earned money, and I don’t like losing that.”

Ms. Young, 35, who graduated with honors from Yale University with a bachelor’s degree in electrical engineering, is hardly the only newbie portfolio manager languishing in tough times. All across Wall Street, dozens of young portfolio managers are flailing in the wake of the year- old dot-com crash.

Consider Ryan Jacob, the poster child for relatively inexperienced growth managers. He rode the technology stock craze for all it was worth; now he’s struggling to do right by investors. A star manager before he was 30, Mr. Jacob steered the Kinetics Internet Fund to a whopping 196% gain in 1998.

Six months later, he left in a dispute with the owners and started his own shop. The Jacob Internet Fund ended the year with a gut-wrenching 79.1% loss.

“There are a fair number of funds out there being run by people with less than 10 years’ experience in the business,” says Marc Klee, 46, manager of the $1.3 billion John Hancock Technology Fund.

Ms. Young’s fund is hardly a loser. While it has shed 14.78% for the year through March 6, its long-term track record is still impressive.

For the three- and five-year periods ended March 6, Janus Olympus gained 23.96% and 24.67%, respectively. That compares with an 8.75% and 14.13% return for the average large-cap growth fund during the same periods, according to Morningstar Inc., in Chicago.

“This fund was never meant to be an all-weather fund,” says Christine Benz, an analyst at Morningstar. “Even within the large growth, there are funds that are a little more all weather, funds that might hug the S&P 500 a little more closely. This fund is never going to be one of them.”

So what went wrong?

Soon after it became clear that dot-com Darwinism was going to be around for a while, Ms. Young began adding more staid, non-technology growers to her normally aggressive mix.

Among those to gain prominence in her fund are Walgreen Co., the drug retailer; Colgate-Palmolive Co., the home product manufacturer; and Safeway Inc., the supermarket chain.

She took steps to reduce the concentration of the fund’s top holdings. For example, the top 10 stocks in the portfolio now account for 25% to 30% of the fund’s assets, down from 35% nine months ago.

“In an uncertain market, it makes sense not to make any outsize bets on any one company,” Ms. Young says.

It remains to be seen whether the shift to slightly more conservative stocks will improve the fund’s performance. But over the short term, it has had a dampening effect.

That’s because the tech-heavy Nasdaq Composite Index climbed 12.23% in January. Janus Olympus apparently missed out on some of that bounce, which may account for the fact that its year-to-date return is nearly 4 percentage points behind the average large-cap growth fund.

“Some of the timing of these more defensive stocks was perhaps not optimal,” concedes Morningstar’s Ms. Benz.

Indeed, the big bets Ms. Young has taken have turned out to be duds. For example, the fund’s largest holding is Veritas Software Corp. in Mountain View, Calif, a relatively small manufacturer of storage management software.

With 5.56% of the fund’s assets invested in Veritas as of Oct. 31, 2000, investors were scalded by a 22.57% decline it its stock price for the year through March 6.

The fund’s second-largest holding, at 4.89% of assets as of Oct. 31, 2000, is an Internet-based provider of trust services called Verisign Inc. The company, also in Mountain View, saw its stock drop 34.37% so far this year.

Ms. Young is also being punished for what she isn’t doing. While other large-cap growth managers took advantage of modest rallies in the financial services and energy sectors last year, Ms. Young steered relatively clear of those two areas.

For example, only about 6% of Janus Olympus’ assets were invested in financial stocks at the end of October compared with 11.4% for the average large-cap growth fund. None of the fund’s assets were in energy stocks versus a 4% investment by its average peer.

Despite the recent lackluster performance, Ms. Young says she is determined to stick with the way she has been running the fund and will continue to scour the market for opportunities to invest in growth.

“My money is in there, too,” she says.