<<Lastly, and most importantly, I believe the Janus outflows rumors and that is the single most important factor here.>>
Not a rumor anymore. From WSJ, 09/28:
interactive.wsj.com
Tide May Be Turning Outward
For Janus Funds; Investors Exit
By AARON LUCCHETTI
Staff Reporter of THE WALL STREET JOURNAL
Janus Funds' streak of pulling in new investor money every month since late 1997 may be on its last legs.
After 32 consecutive months in which the Denver fund firm, powered by the performance of surging technology-heavy mutual funds, has been the vacuum cleaner of the mutual-fund world, this month is shaping up differently. Through Monday, investors have pulled a net $68.3 million out of Janus's retail stock funds during September, a spokesman said Wednesday. The Janus funds haven't ended the month with negative net cash flow since December 1997.
Janus is a major investor in some major high-tech companies, and a pullback from Janus funds by investors could weaken demand for shares of those companies. "I think the tide has turned a little bit for Janus," says Burton Greenwald, a fund consultant in Philadelphia. Investors are "starting to show concern," he says, adding that the recent weak numbers for Janus funds "are the first cracks in an impregnable facade."
Officials at Janus, which is 81.5% owned by Stilwell Financial Inc., have other explanations. The weaker sales numbers in September, as well as a slowdown in August, stem from Janus's having closed five mutual funds to new investors this year, says Jane Ingalls, a Janus spokeswoman. They were closed to maintain investment performance, she adds.
Janus, with $306 billion in assets under management, also remains the best-selling fund firm this year by a wide margin, with investors pouring $37.8 billion into the company's stock and bond funds through August, more than twice as much as the closest competitor, according to figures released Wednesday by Financial Research Corp., Boston. For the year through July, about $231.4 billion in net new cash has flowed into stock mutual funds -- $166.6 billion when the exodus from bond funds is included -- according to the Investment Company Institute, a Washington, D.C., trade group.
"It's a mistake to read too much into" recent weakness at Janus, says Kurt Cerulli, principal of Cerulli Associates Inc. "There's concern" among investors, but "when you put it against the larger backdrop, they're still in very good shape."
Still, if investors accelerate their pulling of money from Janus's stock funds, it could put pressure on some of the high-profile technology companies in its portfolios. According to a recent analysis of Janus's federal filings by Web site bigdough.com, the firm owns more than 10% of 44 companies, as well as big stakes in bellwether technology companies such as Sun Microsystems Inc., Nokia Corp. and Cisco Systems Inc. Continued investor withdrawals may force Janus portfolio managers to cut some positions to meet redemptions.
"That kind of scenario can build on itself" and force portfolio managers to sell their holdings, says Stewart H. Welch III, a financial planner in Birmingham, Ala.
September's flow of money out of the funds is far too small to cause Janus managers to sell their holdings, Janus's Ms. Ingalls responds. "You'd have to be in the billions and billions of dollars" in money flowing out before Janus's managers would have to sell, she said.
While money is moving out of Janus's retail stock funds, it continues to flow in to Janus's institutional series of funds and private accounts. "If you include that, we're still in" net inflows, Ms. Ingalls says. And the Janus retail-sold funds could have a strong final week and finish September with positive cash flows.
Still, it is nothing like earlier this year. Janus stock funds attracted $28.9 billion in new money, or about three-quarters of their net new money so far this year, during the first quarter, when the tech-heavy Nasdaq Composite Index was still setting record highs daily. As the market was peaking in March, Janus's total assets under management rose above $320 billion.
Over the summer, it became apparent that as the Nasdaq cooled, Janus's hot performance was evaporating. According to Chicago-based fund tracker Morningstar, only 29% of Janus's funds were beating similar funds in 2000, through Monday. Last year, 86% of Janus funds beat their peers, and in 1998, all 25 pulled off the feat, according to Morningstar.
The weakening returns have combined with some jitters about executive departures at the fund firm. In August, veteran portfolio manager and Chief Investment Officer Jim Craig announced he was leaving the firm to run a charitable foundation in Denver with his wife. And this week, the firm hastily announced that its chief financial officer had resigned to pursue other interests.
Janus has stopped accepting new investors' money for many of its funds, including Janus Fund, Worldwide Fund, Olympus Fund, Global Technology Fund, Global Life Sciences Fund, Overseas Fund, Venture Fund and Twenty Fund. For many of the funds, Janus imposed a so-called hard close, meaning new investors can't purchase shares in the funds even if they are working through a financial planner who has other clients with shares. Existing shareholders still can add to their holdings, though.
"We've had to go other places," says Michael Deutsch, a financial planner in Memphis, Tenn. Earlier this year, when the Global Life Sciences Fund shut its doors to new investors, Mr. Deutsch started putting clients' money into Scudder Health Care Fund. Global Life Sciences "is just a huge fund, and they can't be as nimble as they'd like to be," especially in smaller biotechnology stocks, he says.
Overall, investors continue to put money into stock mutual funds recently, despite choppy returns. In August, $15 billion of net new cash poured into stock mutual funds, up from $11.8 billion in July, Financial Research reported. So far this month, T. Rowe Price & Associates Inc. and Amvescap PLC's AIM Management Group have estimated stronger stock-fund sales, while Charles Schwab Corp.'s supermarket was projecting stock-fund sales down from last month but up from the year-earlier month. |
