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Why Janus Is Expected to Deliver Subdued Performance in 2Q16

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Performance of funds

Janus Capital Group (JNS), like any other asset manager or mutual fund operator, attracts more capital when it performs well. Overall fund performance is one of the most important drivers of inflows and outflows. Of the company’s complex mutual funds, 59% get a four-star or five-star overall rating from Morningstar, which is higher than in the previous quarter.

As of March 31, 2016, 67% of Janus Capital’s fundamental equity mutual fund assets ranked in the top half of Morningstar’s categories for one-year returns. A total of 84% figured in the top half for three-year returns, and 82% of its assets were included in the top half for five-year returns.

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The company performed less impressively on fixed income mutual funds over the past few quarters than it historically did. As of March 31, 2016, only 20% of fixed income mutual fund assets ranked in the top half of Morningstar’s categories for one-year returns. Meanwhile, 100% of funds ranked in the top half for three-year returns and 83% were in the top half for five-year returns.

Of the firm’s mathematical relative return strategies, 42% finished in the top half for Morningstar’s one-year category, 53% were in the three-year category, and 67% topped the five-year category, surpassing their respective benchmarks.

Janus Capital Group’s net income last fiscal year stood at $156 million. Peers that have posted strong net profits include the following:

  • BlackRock (BLK): $3.3 billion
  • T. Rowe Price Group: $1.2 billion
  • Bank of New York Mellon (BK): $2.7 billion

Together, these companies form 0.9% of the iShares Russell 1000 Value ETF (IWD).

Opportunities across debt funds

Bill Gross, the debt fund manager, manages $1.3 billion under the Janus Global Unconstrained Bond Fund. His fund’s performance trailed more than 75% of similar funds in 2015. Janus Capital’s remaining debt funds have delivered consistently over the past few quarters.

The company has seen diminishing returns on an absolute and relative basis in a highly volatile market. The second quarter in 2016 is expected to be difficult in terms of investment performance. However, on a quarter-over-quarter basis, the company is expected to report strong investment performance.

Mutual fund managers, including T. Rowe Price Group (TROW), American Funds, and Vanguard, have higher market shares of the domestic industry.

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