Investor's Business Daily, September 10th, 2007
Like his many well-timed security trades, Scott Schoelzel knew when to make his move out the door.
The highly accomplished money manager is leaving Janus Capital Group on top.
At the helm of $10.4 billion Janus Twenty Fund JAVLX for 10 years, Schoelzel will leave the Denver fund firm at year-end after 14 years.
He announced his exit after having guided Janus Twenty, his biggest portfolio, back to leadership status. Peaking at $38.5 billion in March 2000, the focused fund was pummeled in the 2000-02 bear market. Janus itself also was tarnished in the market-timing scandal.
The fund family suffered net outflow from 2001 through 2006, according to Financial Research Corp.
"I completed a bargain I made with Tom Bailey many years ago," Schoelzel told IBD. He was referring to the man who founded Janus in 1969 and stepped down as chief executive in 2002.
"It's difficult to build a reputation," Schoelzel added. "It's almost impossible to rebuild one. But it's almost indisputable that Janus rebuilt its reputation and is re-emerging as a cornerstone firm in financial services. With those two things in place, I feel I am leaving the firm in good hands."
Schoelzel has not decided what he will do after taking time off following his departure. It may not involve money management, he said. But if it does, he won't rule out running a hedge fund or similar portfolio.
"I don't know. It could be a 130-30 product," he said, referring to mutual funds that borrow money for investment and/or short securities. Fund's in that category typically short and borrow 30% of assets. "Or it could be a long-only pension product. There are a lot of flavors available out there."
But one thing he is unlikely to do is work for a publicly traded company again, Schoelzel said.
'Tremendous Pressure'
A public asset management firm like Janus, especially after the tech meltdown of 2000, can face strong pressure from outside institutional investors to boost short-term earnings. Investors may push to cut expenses for such things as manager pay and securities research. Investors also could push for changes in investment style to generate better short-term results at the potential expense of long-term returns.
"Today as we speak, there isn't much dissatisfaction from Wall Street (with Janus)," he said. "But two years ago there was tremendous pressure to change the ways we operate. Some things were put in place to satisfy a relatively short-term block of investors."
Schoelzel said he'd like to avoid similar pressures in the future.
"Today everything is going swimmingly," he said. "But another reason it's time for me to go is that, who knows, a year or two from now, some hedge fund or a community of disenfranchised investors could pressure the company, feeling we should run the firm another way."
Schoelzel is the latest in a string of departures by high-profile managers in recent years. The list includes Helen Young Hayes, her sister Claire Young, Jim Craig and Warren Lammert. Tom Marsico, Schoelzel's predecessor at Twenty, left in 1997.
Why can't the firm keep veterans?
Janus doesn't like to lose anyone, says spokeswoman Shelley Peterson. But the firm's marquee lineup of first generation managers taught their successors the value of having a strong research staff. "Just because good folks leave doesn't mean all the good things leave with them," Peterson said.
Schoelzel will be succeeded at Twenty, Janus Adviser Forty and Janus Aspen Forty by Ron Sachs. Sachs has run $4 billion Janus Orion JORNX for seven years. He has been at Janus since 1996. Orion owned 48 stocks as of July 31. Sachs and Schoelzel have not worked together on a portfolio.
Analyst John Eisinger will take Sachs' place at Orion.
Will shareholders give Sachs time to prove his mettle at Twenty?
"Sachs shows how deep Janus' bench is," Lipper analyst Jeff Tjornehoe said. "Shareholders will give Sachs time to show what he can do."
Wall Street has not rebelled against Schoelzel's exit. Janus Capital Group JNS stock is up 1.76% since the move was announced. Janus' stock has been below its 10-week average since mid-August and is 18% off its July high, but it has a Relative Price Strength of 87.
"Most investors won't sell Janus because one very good PM leaves," said Robert Lee, an analyst for Keefe, Bruyette & Woods. "But it will make them keep their eye on the firm."
