Although the selection of a bond fund executive to lead equity--oriented Janus Capital Inc. stunned industry watchers last week, Richard M. Weil — the former Pimco chief operating officer — may be just what the $152 billion fund company needs: an asset gatherer.
“What we were looking for was a proven leader in our industry,” said Steve Scheid, the firm's chairman. “We believe we're at the top of the industry, but our flows are not at the top of the industry.”
Despite relatively good performance, Janus' long-term mutual funds posted net inflows of just $3.88 billion during the first 11 months of 2009, according to Morningstar Inc. That put Janus in 21st place among 558 firms.
By contrast, Pacific Investment Management Co. LLC, where Mr. Weil worked for 13 years, attracted $74.11 billion to its funds, placing it second among the same universe of fund firms.
One way he could attract more assets once he takes over Feb. 1 would be to beef up Janus' sales effort, observers said.
“Right now, our sales force is made up of about 50 to 60 people,” Mr. Scheid said. “Many of our competitors are bigger.”
After recovering from their surprise at his selection, some industry watchers said Mr. Weil's appointment makes sense, given Janus' ambitions to be a major player in the asset management industry.
“His background and experience are exactly what Janus was looking for,” said Michael Kim, an analyst with Sandler O'Neill & Partners LP.
“It's not obvious, but this might be the right fit for the firm,” said Gregory Warren, a stock analyst with Morningstar Inc.
If Janus' intention is to compete against the likes of
The Vanguard Group Inc. and
Fidelity Investments, however, Mr. Weil faces a tough road, said Geoff Bobroff, a mutual fund industry consultant.
Janus is a “second-tier player” and just doesn't have the resources to go up against the big firms, he said.
It's widely believed that Gary Black, who resigned as CEO of Janus over the summer, came to the same conclusion and tried to orchestrate a sale or merger of the firm.
Micah Porter, president of Minerva Planning Group Inc., said that Mr. Weil's Pimco credentials will make him more willing to listen when a Janus wholesaler comes calling.
Before Mr. Weil's selection, Mr. Porter viewed the damage caused to Janus' reputation by the market-timing scandals of 2003 as too great a burden to overcome. Now Janus may have earned itself a second chance.
“Pimco runs a really good shop,” he said. “When we do our due diligence, we may take a look at Janus, based on the improvements [Mr. Weil] makes.”
Still, the bad reputation that dogs Janus makes Mr. Weil's job doubly stressful.
Rosanne Braxton, president of Schroeder Braxton & Vogt Inc., said that having witnessed the fall of once-high-flying Janus funds — the result of the collapse of technology stocks at the beginning of the millennium — it would be hard for her to recommend them again. Her firm manages $170 million in assets.
To its credit, Janus has worked hard to improve the performance of its funds — with some success.
Morningstar gives its domestic stock funds a fund family score of 5, its international funds a 3.3 and its taxable-bond funds a 4.7.
The fund family score is an asset-weighted average of all of a fund company's Morningstar ratings within an asset class. The scores range from 1 to 5. A score between 2.5 and 3.5 indicates that the firm is about average. A score above 3.5 indicates that the firm has done reasonably well.
Janus' fund performance may be a reason it chose someone from the business side of the asset management industry, as opposed to someone from the investment management side, Mr. Bobroff said.
Mr. Weil may even decide to expand the Janus bond business.
“We have a small and fabulous fixed-income group,” said Mr. Scheid. “I'd like to see the fixed-income business be 10 times as big.”
E-mail David Hoffman at [email protected].
