Maybe it's time to forgive Janus Capital Group (NYSE:JNS). At this point, it's almost cruel not to. Let's go over the sad state of recent events at the mutual fund family. Back in April the company took a settlement hit to the tune of $225 million to buy its way out of its past improprieties. Last week it revealed that its asset base had fallen to $135.8 billion.
A year ago, the company had $147.4 billion under assets. Yes, the company's asset base has declined by 8%. This comes even as the S&P 500 has gained better than 16% in that time with less notorious fund operators tacking on to those market returns courtesy of healthy inflows of new capital.
Can we say that the company has suffered enough?
Perhaps this plea should extend to other scandalized companies like Alliance Capital (NYSE:AC) and Bank of America (NYSE:BAC) that have also settled up financially. I guess I'm just singling out Janus here because I have a soft spot for the fallen two-headed Roman god. Fresh out of college in the early 1990s, I did what any market-minded yet cash-poor investor did -- I bought up small stakes in Janus and 20th Century mutual funds.
Yes, those were the halcyon days when it seemed as if every other mutual fund was named Ultra and five-letter ticker symbols were scribbled on grenadine-soaked cocktail napkins.
These days I look back at old Janus Venture and Janus Twenty prospectuses and wax nostalgic. They were my Wall Street training wheels. Maybe that's why I was incensed last year when the company was caught with its grubby hand in the ethical cookie jar. I was fuming, even though it had been nearly a decade since I had trusted the company with my own money. How many potential investors, barely dipping their feet into the equity-trading wading pool the way I once was through Janus, were sent scrambling out of the water hollering "Shark!" and vowing never to go back in?
You can't rattle the pockets of fiduciary faith until lunch money comes rolling out and expect to walk away unpunished. Janus was bad, but Janus also paid the price for that badness in more ways than one. I came oh so close to writing the company, suggesting it drop the letter J from its corporate moniker. But why dwell on recent history when every fund disclaimer will tell you that past performance is no indicator of the future?
These days Janus is operating under the brightest lampposts. Scrutiny is tight. The culprits have moved on. The innocent laboriously carry on. You have real people manning the call centers. You have real people, theoretically with higher ethical principles, manning the funds. When can we bury the past and get back to analyzing the fund family based on its financial performance?
It's a shame because the company points to the fact that 74% of its retail funds are in the top half of their asset classes, according to Lipper's ratings over the past year. It's sad, really. It's brilliant school art that will never see the light of the refrigerator-door magnetic holder. This is the kid throwing the birthday party with the pony rides and double-decker bounce house, but no one is coming because the clouds promise rain.
If we are indeed going to continue to see higher share prices in the near term, it's worth noting that Janus has always been a scorching good player in bull markets. The icing on this storm-shadowed cake is that part of the company's settlement involved earmarking $100 million over the next five years in management fee reductions. So let others bow out of the party. The bounce house will be just that more bouncy. Those ponies? Why they'll ride like gallant stallions.
In the end, evolution always nails the prom queen. That's what may be so disheartening about the wasted rage here. It won't matter. Troubled fund companies will go on to be acquired by spared outfits or just change their names, and everyone will forgive simply because they forget. Our Motley Fool Champion Funds newsletter is off to a great start. I can respect the fact that Shannon Zimmerman is digging deep to find quality funds with clean records, but hasn't Janus paid its debt to society already?
I mean, I will always respect the wholesome operators like T. Rowe Price (NASDAQ:TROW), but I'm also willing to wager on the stability of the parolee. When a two-headed god begs for forgiveness and is willing to shave costs to lure new investors as if they could be bought as investing mercenaries, I know what I would do. I would turn the other cheek. Twice.
I forgive you, Janus.
Longtime Fool contributor Rick Munarriz invests in no-load mutual funds, though his core holdings will probably always be individual stocks. He does not own shares in any company mentioned in this story. The Motley Fool is investors writing for investors.
