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Friday, July 26, 2013

Three Things to Know About Janus' Earnings

Reported by Casey Quinlan

Things aren't looking too hot for Janus Capital Management [profile], which reported a profit that fell behind expectations.

Janus posted a $2.2 billion increase in the market value of assets under management and net outflows of $5.4 billion.

Meanwhile, the firm's net income came in at $15.8 million or 8 cents per share compared to 15 cents in the first quarter. This lagged the Zacks Consensus by 2 cents, coming in at $0.14 cents. According to Thomson Reuters, analysts on average expected $0.16 a share.

A year earlier, its second quarter net income came in at $23 million. Total revenue rose 0.7 percent to $215.8 million. Revenue missed the Zacks Consensus of $218 million. According to Wall Street Cheat Sheet, it missed the average revenue expectation of $217.76 million.

Janus reported an AUM of $160 billion, down from $163.8 billion at the end of the last quarter. Average AUM, however, was reported to be $164.2 from $161.8 billion.

Looking through Janus' earnings call transcript at Seeking Alpha, three issues were raised that merit attention:

POINT 1: INTECH Slipped.

POINT 2: Outflows, due to PM turnover, will continue in the third quarter.

POINT 3: Expect fixed-income volatility to hurt flows.

POINT 1: Outflows, due to PM turnover, will continue in the third quarter.

At one point during the conference call, chief executive Richard MacCoyWeil, CEO of Janus had this to say:

INTECH tends to be a very, very effectively risk-controlled product set across their line of products. And they can move around the index and the measure of how much is above or below can move around visibly as a result. That can happen with the relatively modest amount of change in investment performance. And so that's happened a little bit in this quarter. There's no particular important message to it that we see. INTECH's long-term performance remains very solid. What they do works. Under the new leadership of Adrian Banner, over recent periods, I think they've become even more effective and focused as a team. We're very optimistic about what they're doing in some new products in terms of low volatility, in terms of some income-oriented products and some international-oriented products. And so we think they're on the right track going forward. And I wouldn't draw too much of a message out of the rather modest changes to investment results over short periods of time.
POINT 2: Outflows, due to PM turnover, will continue in the third quarter.

In response to an analyst question, MacCoyWeil declared:
We're seeing a pickup particularly outside of the United States in both -- I don't have the specific formal RFP numbers in front of me, and a lot of that business doesn't always go to formal RFP state. But it's safe to say that, particularly, outside the United States, we're seeing a lot more serious interest and activity in the zones we talked about in those INTECH products. I think that's probably as fair an answer as I can give you.

POINT 3: Expect fixed-income volatility to hurt flows.

MacCoyWeil had this to say on the subject:

Obviously, there's a lot of concern in fixed income markets and there's been a lot of volatility. And June was a particularly tough period in rates for fixed income investors. And the decision-making at the government and central bank level around policy and market intervention and uncertainty around those processes is going to drive volatility and fear in fixed income markets for a while. So we haven't seen the great rotation that people talk about out of fixed income into equities in a big way, but we've seen a lot of concern and fear in fixed income markets, and that's clearly affected flows into fixed income.

I would say impossible for me to predict the future, past in that zone. Although certainly, I would anticipate continuing volatility in fixed income around whatever central bankers and governments say and do for the near period. That said, our fixed income team continues to be doing just an excellent job. And I think they'll continue to gain market share from everything I can see. But the loss will clearly be affected by industry flows and which direction the river is flowing. But again, I don't think we've seen the great rotation by any means. We haven't seen any sort of capitulation by fixed income investors by any means. And we haven't seen the sustained rate rise that so many people expect yet. So there's a lot of -- we're in the third inning of that sort of fixed income game or maybe second. I think there's a lot left to go. But our guys are doing a very good job. They're well positioned. And they continue to gain market share and we're very happy about our fixed income team.

To learn more, see the transcript of Janus' earnings call and the earnings release for more on how Janus is doing.  

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