DENVER - Janus Capital Corp., a mutual fund company with a patently retail focus, has been quietly attracting lots of attention - and assets - from defined contribution plans.
In just the first six months of 1997, Janus' assets under management for such plans jumped 57% - to $9.1 billion from $5.8 billion.
Defined contribution assets increased 160% from Dec. 31, 1995, to June 30 this year.
Some of the increase undoubtedly is due to market growth as the bull market roars on. But market growth alone can't explain the big jump.
"The simple answer about Janus' popularity with defined contribution plan sponsors is that the performance of its funds is very good," said Richard Reinking, an investment consultant at Hewitt Associates L.L.C., Lincolnshire, Ill.
Notable client gains
"It's a straightforward, well-managed company. 'Janus' is a sticky name, it clicks. For some reason, people remember the name and associate it with very good performance," he added.
Janus has gained some notable defined contribution clients this year, including Bechtel Power Corp., Westinghouse Electric Corp. and International Paper Co.
Of the Janus funds in Pensions & Investments' ranking of mutual funds most used by defined contribution plans, Janus Twenty has been the stellar performer, said Mr. Reinking.
Using data from Morningstar Inc., Chicago, Mr. Reinking's style and performance analysis put the Janus Twenty Fund in the sixth percentile ranking among large-capitalization value equity funds for the five years ended June 30.
The $5.3 billion fund (as of June 30) was one of the few actively managed funds that came close to matching the performance of the Standard & Poor's 500 Stock Index for that period. The Janus Twenty Fund returned an annualized 26.94% for the three years ended Aug. 31, according to Morningstar data. The S&P 500 returned 26.6% for the same period, according to RogersCasey, Darien, Conn.
Assets up 139%
The fund's performance did not go unnoticed: Defined contribution plan assets invested in the Janus Twenty Fund were up 139% as of June 30 to $700 million, compared with $293 million as of Dec. 31. Since Dec. 31, 1995, defined contribution assets grew 192%.
The $18.1 billion Janus Fund had $3.5 billion from defined contribution investors as of June 30, up 45.8% from Dec. 31, 1996.
The Janus Fund, a large-cap blended fund, has been a very consistent performer over the three-year period, generally besting the median manager in its asset class, said Mr. Reinking. But its performance in recent months has slipped.
Janus' international funds, Ja-nus Worldwide and Janus Overseas, also have had fabulous runs this year, said Avi Nachmany, a mutual fund analyst at Strategic Insight L.L.C., New York.
International most successful
"Clearly Janus has been riding on an enormous wave of success, but what underlies Janus' acceleration is not due to what Janus was historically known for - domestic equity funds. The principal component of its success has been its international funds, which have seen $5.6 billion in new money in the first eight months of this year," said Mr. Nachmany.
Janus Worldwide nearly doubled in size to $9.8 billion as of Aug. 31 from $5 billion as of Dec. 31. Janus Overseas has nearly tripled in size to $2.9 billion Aug. 31 from $953 million at the beginning of the year. Both funds are well-used by defined contribution plan investors.
Many 401(k) plans that use an alliance or other third-party arrangement now include one or more Janus funds, said Cathy McBreen, practice leader-retirement service in The Spectrem Group Inc.'s Chicago office. Spectrem is a mutual fund industry consultant.
"When we do plan sponsor focus groups, Janus is a name brand that comes up often. I know that they have a strong name brand focus, and participants and sponsors know the company and like it. It's the performance that keeps those funds appearing in a lot of 401(k) plans," said Ms. McBreen.
Janus was the 33rd largest manager of defined contribution plans as of Dec. 31, according to P&I's July 21 directory of defined contribution plan managers.
Overall, Janus managed $67.7 billion as of Sept. 23, including 19 mutual funds and $8.8 billion in institutional separate accounts.
The amount now managed in separate accounts is a higher proportion of the company's overall assets than it ever has been, said Russell P. Shipman, vice president of institutional services.
Janus began concentrating on the 401(k) plan market five years ago, and took a two-pronged approach, he said. The company makes a lot of direct sales to plan sponsors for investment-only services, a business he said has grown substantially in the past two years.
Business from alliances grows
But it has made the most progress in another distribution channel - strategic alliances - selling through banks, insurers, third-party administrators, mutual fund supermarkets and mutual fund alliances.
"Our strategic alliance programs, which we set up 41/2 years ago, are ballooning. They are finally beginning to bear fruit" Mr. Shipman said.
PNC Bank, Pittsburgh, is one example. After working closely to educate PNC sales staff about Janus, the bank has brought close to $100 million in new 401(k) plan business to Janus, "embracing our product within their own offerings."
Janus has made all of its progress in the defined contribution plan market on an investment-only basis.
Unlike many other mutual fund powerhouses, Janus officials have steered the company away from providing bundled services, especially record keeping.
"We're a unique animal in the marketplace without a bundled product. It's a bit surprising to some people that we've gotten to $67.7 billion under management and don't offer anything bundled, but our philosophy has been to concentrate on our core competency, which is running money," Mr. Shipman said.
Moving to a new division
In the reorganization of the financial businesses of parent Kansas City Southern Industries Inc., Kansas City, Mo., which is planned for the fourth quarter, Janus will be moved into a new division.
Mutual fund manager Berger Associates Inc., also based in Denver, and DST Systems Inc., Kansas City, Mo., a mutual fund back-office processor, also will be part of the division. KCSI owns 83% of Janus, 87% of Berger and 40% of DST.
The separation of financial services from KCSI's railroad businesses will not affect Janus' operations, Mr. Shipman said.
"We've had an autonomous relationship with KCSI since they bought a majority share of Janus in the mid-1980s. They take a hands-off approach and leave us alone to do what we do best. We don't anticipate any change."
Observers speculate KCSI might be shopping for another money manager to broaden its investment product line, especially in the emerging markets arena. Others wondered whether the purchase of a third-party administrator/record keeper might make sense if KCSI wanted to enter the bundled 401(k) plan arena. Still others think KCSI will leave its successful money management units alone to manage money.