Janus

THE BEAR market has left the entire fund industry with some explaining to do, but some firms have a lot more to answer for than others. Last week, this column started breaking down the question of which big fund company has the most to prove, with the finalists for the dubious distinction being Janus, Putnam and AIM. As detailed previously, Janus had the worst dollar-weighted performance, where all stock assets are lumped together and the loss was...

CHICAGO - AT A recent Morningstar Investor Conference here, there was a lot of talk about the end of the bear market, or at least how the worst appears to be over. If we hold that to be true - and it's still open to debate in my mind - then it's time for the bear-market post-game show, and today's wrap-up raises an interesting question: Which big fund company has the most to answer for? There are plenty of contenders. Lots of funds were managed recklessly during the bull market and well into the bear.

FOR THE PAST three years, investors in the Janus funds have been waiting for the company to regain its footing. Now, thanks to yet another change in the top-manager ranks at the Denver-based firm, they may wonder whether they were wrong to stick around. Janus, which grew dramatically in the late 1990s when the market was hot, has been struggling since the market soured on growth and started backsliding. In that time, Janus' management structure changed, with top investor Jim Craig leaving in 2000 and company founder Tom Bailey hitting the exit last year.

DENVER - Helen Young Hayes, who was promoted 14 months ago to help prop up Janus Capital Group Inc.'s slumping mutual funds, resigned as investors continued withdrawing money after pulling $14.2 billion more than they added last year, the company announced yesterday. After taking on new duties as managing director of investments, Hayes, 40, continued to oversee billions as co-portfolio manager of Janus Worldwide Fund and Janus Overseas Fund. Each of those funds fared worse than at least 83 percent of rival funds over three years.

IN THE Stilwell Financial family, there was never any question about which fund company was the big sister and which firm was the annoying little sister. But just as little sisters tend to exact revenge in real life, so are the Berger funds becoming a major embarrassment to Janus, by bringing into question the big sister's status as an elite growth manager. It may be resolved happily for all involved, but not without Janus getting a black eye. The trouble started in October, when Stilwell - the holding company for both Janus and Berger - announced a reorganization to become what amounts to the Janus Fund Co. Janus officers were to be in charge of all operations that are currently part of Stilwell; Berger was to be vaporized, its value funds becoming additions to the Janus lineup while its growth and international funds were merged out of existence.

DON PHILLIPS became known in the fund industry for calling things as he sees them. As Morningstar Inc.'s first-ever analyst, he helped bring the Chicago research and data company to prominence. Today, as managing director, he oversees a company with a ratings system that can make or break mutual fund companies. What Phillips says carries weight in the industry and should with individual investors. Last week, this column was devoted to some of his more general comments on the industry.

SPEAKING TO a small group of fund investors recently, I asked how many people owned Janus Funds. About half of the 40 people there raised their hands. Just one of those investors had voted on the proxy statement they received from Janus weeks ago announcing changes to the company and its investment policy. The nonaction was explained away with phrases like "Couldn't make heads or tails of it." It's proxy season, the time of year when fund firms with issues to resolve send dense, complicated reading material your way. Proxies can be as important as they are confusing.

ALWAYS keep an eye on top management. When a mutual fund firm is hot, everyone worries that management will leave. When the firm is lagging, no one seems to care. That has to be why Janus Fund founder Tom Bailey's recent sale of his ownership stake in the firm caused barely a ripple in the industry. In 2000, before the current market decline dropped Janus to the bottom of the performance heap, investors were panicked that Bailey might leave and take a bunch of managers with him. Bailey, the firm's chief executive officer, was involved at the time in a nasty fight for control of Janus.

IN DECEMBER of 1998, Mike Lu warned his mother not to make the Janus Global Technology fund her primary investment. The fund was new and - even for Janus, with its reputation for goosing returns by picking hot tech stocks - tightly focused and undiversified, the wrong kind of option for a huge chunk of the family nest egg. Wowed by the bull market, Lu said, his mother didn't heed his warning, diving heavily into the fund, noting that she "expected annual...

THE No. 1 question among fund investors these days seems to be "What the heck is happening at Janus?" So I came to Denver, to the company's headquarters, to find out. I found a fund company, pretty much like any other. Despite rumors to the contrary, Janus managers don't set their hair on fire in pursuit of aggressive growth stocks. Nor are they pulling their hair out because of interference from Stilwell Financial, their new corporate parent. Nor have they necessarily lost the stock-picking ability that led them to be the best fund company of the late 1990s.