Janus is getting ready for big spending spree

Janus Capital Group Inc. is operating under a cloud, but it plans to use a big chunk of cash to cure a bundle of ills.

The mutual fund company, with more than $150 billion under management, plans to pocket $1 billion from the sale of its stake in Kansas City, Mo.-based DST Systems Inc. during the fourth quarter.

Although half that amount may be used to pay down corporate debt, Janus says it plans to use the other half to bankroll the hiring of portfolio managers and headhunting for entire fund management teams, as well as making acquisitions of funds and/or fund groups.

The company’s plan for grabbing talent is intended to widen its range of investing styles and distribution platforms.

`Plug and play’

The beefed-up arsenal, Janus executives say, will help drive a shift in focus to financial advisers for a company that once relied strictly on direct sales.

“A lot of the distribution functions [advisers] can get through our capabilities,” says Girard C. Miller, the company’s chief operating officer.

Brand name “is the important part there,” Mr. Miller adds. “The advisers will be able to plug and play, and still be in the Janus family.”

Carlo Panaccione, principal with Navigation Group Inc. in Redwood Shores, Calif., says that Janus’ new approach could bring him back into the fold.

Mr. Panaccione, whose company manages about $150 million, says he would be more likely to put assets into one of the to-be-acquired, untarnished funds. It could get him comfortable with the idea of using the Janus name again, he adds.

Like many advisers, Mr. Panaccione is reeling from Janus’ three-year swoon in performance associated with the technology bubble, followed by its being named in the mutual fund trading-practices lawsuit brought by New York Attorney General Eliot L. Spitzer.

Mr. Panaccione says the only fund carrying the Janus name that he still uses is a former Berger Financial Group LLC portfolio whose name was changed when the Denver-based sister companies merged.

New blood

Judy Shine, president of Shine Investment Advisory Services Inc., which has $300 million under management, says it may be a while before she buys a Janus fund, but she thinks the company is smart to infuse itself with new blood.

“Acquisitions dilute the brand name,” says the Englewood, Colo.-based financial adviser.

“To dilute it now is a good thing,” Ms Shine adds. “If they get three or four mutual funds that perform well, they’re going to get investors.”

But some observers question the strategy of getting bigger to get better.

Kacy Gott, principal with Kochis Fitz Tracy Fitzhugh & Gott Inc. in San Francisco, says that he doesn’t need Janus to create an all-inclusive fund conglomerate for him.

After all, he says, companies such as Charles Schwab & Co., Boston-headquartered Fidelity Investments and TD Waterhouse Group Inc. of New York have created perfectly good virtual fund complexes with their supermarket approach.

“We don’t need plug-and-play,” adds Mr. Gott, whose firm oversees about $700 million. “We’ve got that.”

Mr. Gott is right about Janus’ new strategy, says industry observer Geoff Bobroff, who is president of Bobroff Consulting Inc. in East Greenwich, R.I.

“I think it’s 10 years out-of-date,” Mr. Bobroff says. Firms such as “T. Rowe, Fidelity and Vanguard,” he says, can be all things to all investors.

Donald Cassidy, a Denver-based senior research analyst with Lipper Inc. of New York, says that attempts at leveraging a brand fail frequently.

But Mr. Cassidy says that Janus’ increased attention to advisers is a good sign for the company.

“At their size, they could live without developing this distribution channel,” he says. “But you can live a lot better with it.”

The plan to acquire other fund companies could lift Janus out of the ashes, says Scott Slater, a senior financial services consultant with the Spectrem Group Inc. of Chicago “I think brand still drives the fund business, despite what some advisers say,” says Mr. Slater, who works from Minneapolis.

A strong brand saves advisers time by reducing the need to explain to clients why they chose a particular fund or group of funds to invest in, he adds.

But Mr. Bobroff says it’s tough to turn brand associations on a dime.

“I think [Mr. Miller of Janus] is optimistic,” he says.

“The perception in the marketplace is that they’re a growth shop, and I don’t know if that ever changes.”

Mr. Miller agrees that for many companies, change is hard. But he says that Janus won’t allow the $500 million to “burn a hole” in its pocket and that it will take care to buy truly excellent companies and fund managers.

He adds that he thinks that 34-year-old Janus has a truly special staff of 1,200 employees who are showing a real determination to roll up their sleeves and execute the strategy.

“That’s been a great blessing,” Mr. Miller says. “In any other organization, this would be a huge and unimaginable task.”