UPDATE 3-Janus results shows fund manager turnarounds take time

Thu Jan 24, 2013 1:46pm EST

* Profit 17 cents per share vs Street view 14 cents

* Net outflows $3.6 billion despite performance uptick

By Ross Kerber

Jan 24 (Reuters) - Money manager Janus Capital Group Inc reported on Thursday that customers kept withdrawing cash from its mutual funds in the fourth quarter, even as it reported a quarterly profit that topped estimates, disappointing shareholders who had hoped for a faster turnaround.

Net withdrawals by customers were $3.6 billion during the last three months of 2012 and $12 billion for the year, Denver-based Janus said.

Investors yanked money even though many Janus funds performed well last year. At Dec. 31, 68 percent of the company's traditional equity fund assets ranked in the top half of their Morningstar categories over the past year, Janus said, compared with just 20 percent over the past three years.

"Once a fund suffers a period of underperformance, you need to not only be able to recoup that but to demonstrate sustained outperformance for a longer period of time to get investors back," said Sandler O'Neill analyst Michael Kim. "That's the overriding theme here."

Shares in Janus were down 3 percent in early afternoon trading to $9.50, reversing early gains as the flows figures overshadowed the forecast-beating quarterly profit.

"Sizeable outflows persist," wrote Stern Agee analyst Jason Weyeneth in a note to investors.

Janus had stumbled badly when the Internet bubble popped in 2000 and again after the mortgage lending bubble. Janus shares remain down more than 60 percent since the market crash of 2008 while the stock prices of many other money managers have already recovered.

Janus Chief Executive Richard Weil, in a conference call with analysts, noted the time it takes to come back from a period of declines. Weil touted "an exceptionally strong year" for many funds, but said that in many cases "we are dragging some medium-term negative performance."

For the quarter, Janus reported net income of $31.2 million, or 17 cents per share, down from $35.7 million, or 19 cents per share, a year earlier. Analysts' average forecast was 14 cents a share, according to Thomson Reuters I/B/E/S.

Revenue rose by $1 million to $216.6 million. Operating expenses climbed by more than $13 million, to $158.6 million, driven by higher compensation costs.

Among larger Janus funds, the $3.6 billion Janus Forty Fund, a large-cap growth fund, beat 98 percent of peers in 2012 but only 11 percent of peers over the three years ended Dec. 31, according to data from Lipper, a unit of Thomson Reuters.

The $2.5 billion Janus Contrarian fund, which invests in companies of many sizes, beat 97 percent of peers last year but just 5 percent of competitors over the three year period.

Janus finished the quarter with $156.8 billion under management, down from $158.2 billion at Sept. 30. Market gains drove up assets by $2.1 billion in the period, Janus reported net outflows of $3.6 billion from long-term funds.

Investors pulled $2.7 billion from Janus' traditional equity funds in the quarter, and withdrew $1.6 billion from Janus' quantitative funds.

Janus posted net inflows of about $700 million to its fixed-income funds, an area it has been building up. That was lower than the $1.2 billion Stern Agee's Weyeneth had forecast.

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