To anyone who has been following the exchange between Morningstar and Janus (NYSE:JNS), this much should be obvious: Janus CEO Mark Whiston fully expects his company's mutual fund clients to award a "do over." Whiston took issue with Morningstar's decision to pull its recommendations from Janus funds across the board, and said as much in a letter to Morningstar CEO Joe Mansueto (Adobe Acrobat reader required). Whiston pointed out that Morningstar's recommendation suggests that investors "should question their confidence in an organization that has served their trust for 34 years."
Heck yeah, they should question their confidence in Janus. Janus' breach of client trust in allowing Canary Capital to siphon off client assets in a market-timing scheme is egregious enough that no amount of damage control can repair the damage. This wasn't the case of a rogue employee setting up a deal that Janus then had to counteract -- upper management at Janus approved the deal.
What Whiston cannot afford to recognize, and what should be obvious to anyone, is that the old adage holds: It takes years to build up a reputation, but only seconds to destroy it. In money management, trust is everything, and Janus put it on the line in the chase of a few extra million dollars. Janus is, of course, innocent until proven guilty under a court of law. The court of public opinion, though, requires no such niceties. The burden of proof is clearly on Janus that it is deserving of the trust to manage one penny of other peoples' money.
We don't expect the folks at Janus to put on hairshirts or prostrate themselves before the body politic. But Whiston's assertion -- that three bad years plus an itty-bitty case of theft from shareholders shouldn't make people forget the previous 31 great years -- doesn't even register. Doesn't he know that "past performance has no bearing on future results"?
Janus has posted yet another Whiston oeuvre on its website (Adobe Acrobat reader required). In it, the closest Whiston says to "we screwed up" is a recognition that Janus has been "mentioned in the complaint." Whiston then admits that Janus allowed market timing by hedge funds, stating that Janus would "make further amends" if it is found that "these arrangements adversely impacted fund shareholders in any way."
Gee, fellas, don't you think that the time to figure out if a special arrangement will hurt shareholders is before you approve it? And now you're upset that Morningstar is warning investors not to trust you? If I were an investor in one of Janus' funds, I would not be the slightest bit interested in the legal disposition of this case. Janus said it didn't allow market timing in its prospectuses, and then it did just that. Those 31 good years (and even the three really bad ones)? Ancient history.
