Has Janus Added Value As An Active Manager?

I’ll continue my series today on the performance of the market’s most prominent active fund families with a look at the actively managed mutual funds offered by Janus Capital Group. Janus rose to prominence in the dot-com boom with assets swelling to $330 billion. However, according to recent rankings, Janus is now only the 51st largest fund family with assets under management of about $191 billion as of March 2016.

Janus became an interesting case when, in October 2016, The Wall Street Journal reported that the firm, facing investor withdrawals from some of its funds, agreed to sell itself to a British rival (the Henderson Group) as part of an effort to better compete with increasingly popular low-cost providers. The article noted: “The agreement highlights the pressure on active money managers, who make their own decisions on buying and selling stocks and bonds, and typically charge more for their services.”

The article continued: “Investors pulled $166.2 billion out of actively managed U.S. stock funds through August of this year, according to research firm Morningstar Inc., while pouring $109.9 billion into passively managed U.S. stock funds.”

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It also observed that while firms with large passive businesses, such as BlackRock and Vanguard, were big beneficiaries of the shift, Henderson had net outflows of £2 billion from its funds in the first half of the year and investors pulled a net $300 million from Janus over the same period.

Can those flows be justified given Janus’ track record versus passive alternatives? Let’s examine the performance of Janus’ actively managed funds.

As is my practice, to see how well Janus’ actively managed funds have performed for their investors, I’ll compare the results of the firm’s actively managed equity funds to those of index funds from Vanguard and the structured asset class funds of Dimensional Fund Advisors (DFA). (Full disclosure: my firm, Buckingham, recommends DFA funds in constructing client portfolios.)

DFA funds can be purchased through some 529 and 401(k) plans, but generally they are available only through an advisor. An investor would incur fees from that advisor; those fees can vary greatly (in some cases they are very low) and may cover the full range of financial planning services provided by the advisors. Vanguard funds can be purchased directly by investors.

To keep the list to a manageable number of funds and to ensure that I examine long-term results through full economic cycles, I analyzed the 15-year period ending September 30, 2016. Furthermore, when there was more than one share class of fund available, I used the lowest-cost shares that were obtainable for the entire period. In the cases where Janus has more than one fund in an asset class, the average return of those funds was used in the comparison.

The following table shows the performance data for the actively managed funds offered by Janus in five domestic equity asset classes and one international equity asset class. Funds are placed in a given asset class based on Morningstar’s style categorization.

Janus Capital

By Larry Swedroe, read the full article here.