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Janus Capital Group Inc. (NYSE:JNS)

Q1 2010 Earnings Call

April 22, 2010; 10:00am ET

Executives

Rick Weil - Chief Executive Officer

Greg Frost - Chief Financial Officer

Analysts

Roger Freeman - Barclays Capital

Michael Kim - Sandler O'Neill & Partners

Jeff Hopson - Stifel Nicolaus & Company

Robert Lee - Keefe, Bruyette & Woods

Mark Irizarry - Goldman Sachs

Bill Katz - Citi

Mike Carrier- Deutsche Bank Securities

Cynthia Mayor - Bank of America/Merrill Lynch

Ken Worthington - JP Morgan

Operator

Good morning. My name is Jasper, and I will be your conference facilitator today. I would like to welcome everyone to the Janus Capital Group, first quarter 2010 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer period. In the interest of time, questions will be limited to one initial and one follow-up question.

Before the company begins, I would like to reference their standard legal disclaimer. This also accompanies the full slide presentation located in the Investor Relations area of www.jenus.com. Statements made in the presentation today may contain forward-looking information about management's plans, projections, expectations, strategic objectives, business prospects, anticipated financial results, anticipated results of litigation and regulatory proceedings, and other similar matters.

A variety of factors, many of which are beyond the company's control affects the operations, performance, business strategy, and results of Janus, and can cause actual results and experience to differ materially from the expectations and objectives expressed in their statements. These factors include, but are not limited to the factors described in Janus's reports filed with the SEC, which are available on their website www.janus.com, and on the SEC's website www.sec.gov.

Investors are cautioned not to place undue reliance on forward-looking statements, which speaks only as of the date on which the statements are made. Janus does not undertake to update such as statements to reflect the impact of circumstances or events that arise after the date these statements were made. Investors should however; consult any further disclosures Janus may make in the reports filed with the SEC. Thank you.

Now it is my pleasure to introduce Rick Weil, Chief Executive Officer of Janus Capital Group. Mr. Weil, you may begin your conference.

Rick Weil

Thank you very much. Good morning everybody. Welcome to the Janus Capital Group first quarter 2010 Earnings Call. As the operator said, I am Rick Weil, CEO of Janus Capital Group; and I have with me Greg Frost, our CFO for this call.

Our agenda today will be to follow the quarterly earnings presentation book that you all have. I will first provide a summary of earnings investment performance inflows. I will drill down a bit into some of those elements, and then Greg Frost will present our financial results in some more detail; and finally I will cover a bit about our vision and priorities. Last we will take some questions.

Okay, quarter one 2010 EPS was $0.17 a share versus $0.20 in the fourth quarter of 2009. As I said Greg will cover the financial results in more detail in a minute. First quarter net flows for the company were a negative $1.9 billion. $4.3 billion of net outflows at INTECH more than offset positive $1.4 billion for Janus, and positive $1 billion for Perkins. Overall AUM at March 31 was up to $165.5 billion, a 4% increase over December 31, 2009.

Long-term performance remains strong across out mutual fund complex, with 84% of our funds in the top two lipper quartiles on a three and a five year basis as of March 31. Additionally, we were very pleased to win Lipper 9 awards for best funds based on risk-adjusted returns. 49% of our funds have a four or five overall morning star rating at March 31, 2010.

Flipping to page 3 of the book. In the lower left corner you can see the flows for INTECH. I would like you to focus a moment on INTECH. INTECH suffered $4.8 billion of gross outflows in Q1; consistent with the $4.6 billion of gross outflows last quarter. Outflows are very hard to predict. INTECH has been successful at building large relationships, which means individual decisions can drive large blocks of assets.

Outflows are very importantly affected by investment performance to state the obvious, and there is a lagged basis for that, and they are also subject to broader industry flows. Relevant to continuing rate of outflows we note, and now I am listing from a bullet on page four, that short term performance at INTECH has been improving with 75% of their strategies, which is actually 96% of their assets on an asset waited basis. Outperforming respective bench marks for the six months ended March 31; that’s clearly a good start, but just as clearly consistent out performance in future quarters is needed to address this situation.

Gross inflows were $500 million in the first quarter for INTECH. This was down from prior periods. While we do not give guidance on flows, I can tell you that funded gross inflows at INTECH in April are already materially higher than the $500 million of gross inflows in the first quarter. Through the recent crisis, INTECH, as well as many other mathematical or quantitative managers, have faced particularly challenging, disrupted and chaotic market conditions.

I believe the current stabilizing market condition should offer better opportunities for INTECH’s process, to generate historic levels of return going forward. But it is very clear that INTECH’s future depends on continuing positive investment performance to drive an improved picture in close.

Turning away from INTECH, on page three of the presentation we also detail flows of Janus and Perkins. The market was definitely more favorable for fixed income and value equities, and was a tougher environment for growth equities in terms of flows. At Janus we had net flows $1.4 billion which were consistent with prior quarters. This represents an approximately 6% annual gross rate.

Fixed income contributed approximately two-thirds of this flow. Janus growth strategies which are about 25% of our Janus AUM experience 2% annualized organic growth in the quarter, compared to what we believe was about a minus 2% for the overall industry. Furthermore, I think the Russell value index is outperforming the Russell growth index by more than 500 basis points year-to-date at March 31, which creates a though environment for growth strategies in the first quarter.

In spite of these headwins, Janus is gaining market share and seeing increasing opportunities. We saw a 26% organic growth rate in the broker dealer channel and good growth in retail intermediary overall; about $2 billion on the quarter on the base of end of period assets of $110 billion.

At Perkins exceptional long-term performance drove net inflows of $1 billion. This level of inflows represents very strong organic growth rate of over 25%. Perkins has just announced though that they are closing the small cap value fund to new investors as of May 25.

On pages four and five of our book, we present some more detailed information about investment performance at each of our brands. I will just quickly highlight that 81%, 88% and 86% of Janus equity mutual funds are in the top two lipper quartiles, on a one, three and five year basis at March 31. At INTECH those same numbers are 0%, 42% and 56%, outperforming their relative benchmarks over one, three and five years at March 31.

As noted earlier, 75% of the strategies, which is about 96% of the assets on asset rated basis have outperformed over the most recent six months ended March 31. At Perkins, the same numbers are 50%, 100% and 100%of their mutual funds are in the top two lipper quartiles in a one, three, five year basis at March 31.

At this point, I will ask Greg Frost to give you some more information about our financial results.

Greg Frost

Thank you Rick, and good morning. I’m on page seven of the presentation. As Rick mentioned, EPS in the first quarter was $0.17 compared to $0.20 in Q4, and obviously a significant loss a year ago, driven by the goodwill charge that we recorded in much different market conditions than we are experiencing today.

The quarter was marked by higher average assets, yet revenues were slightly lower and expenses were up slightly, which caused margins to decline by roughly 300 basis points; and let me provide a little more color on this point. The driver of revenue was frankly lower performance fees. I recall that last quarter we discussed a large Janus separate account, for which we recorded a full years worth of performance fees in the fourth quarter, totaling roughly $5 million. If you factor this into the current quarter, revenue looks a lot more in-line with the increase in average assets.

On the expense side, the 3% increase from the fourth quarter can largely be explained by higher variable expenses, which we would expect to a slightly higher revenue; again, adjusting for the performance fees, and the effect of the Perkins compensation plans on our long term incentive line that we talked about last quarter.

Digging a little deeper into expenses; on the comp side historically we have seen spikes in the first quarter from base salary increases and payroll taxes etc. We don’t necessarily see that this quarter, but the normal increase is that we did see we more than offset by the timing of compensation accruals in 2009. As the markets improved and assets and revenues increased throughout the year, frankly the majority of the compensation line was booked for Janus in the second half of 2009 versus the first half. So we have a little bit of a timing impact going on there, between the fourth quarter and first quarter of 2010.

On the long term incentive line, we obviously saw significant increase from the senior profits interests at Perkins. Recall that these were designed to incent revenue growth and long term performance for the team in Chicago. They are probably hitting -- the expense is hitting 2010, a little more than we originally planned, but the good news is that Perkins assets have increased, almost doubled, they have increased 85% since we closed the transaction for the additional 50% at the end of 2008, and their performance over the three and five year period continues to be top docile. It is not unexpected to see more expense flow through. At current AUM levels of Perkins and performance levels, I would assume to see another $8 million to $10 million of expense being booked in the reminder of 2010.

On the fund proxy point, which we also discussed last quarter, we said that we expected to see a total of $7 million to $10 million to hit in the first half of the year. We are still on track on that number. We recorded $1 million of this expense in the first quarter, therefore it is likely that we would see between $6 million to $9 million of additional expenses in the second quarter. I expect to see very little expense in the second half of the year related to the proxy; however, we could see a modest increase in marketing expense, as sponsorships and channel level advertising picks up a little bit throughout the year.

We talked quite a bit in the fourth quarter call about reinvesting back in our business. A little color there; we didn’t see a lot of impact on that in the compensation line, as our hiring still remains fairly slow. Although we did see a pick up in the G&A line from technology, which we talked about, and some employee related expenses.

Lastly on the capital side, it always comes up; I thought I’d address it here. We have adequate cash on the balance sheet today to satisfy our near term debt maturities in 2011 and 2012, and we obviously continue to focus on building a stronger balance sheet as we move forward. We are committed to have a balance sheet that allows us the flexibility to reinvest in our business for the long-term growth, and adequately withstanding market shocks.

With that I will turn back over to Rick.

Rick Weil

Thanks Greg. Before we take questions, I would like to take just a few more minutes of your time to describe what I see here at Janus after my first almost three months. During the last just short of 90 days, I’ve done a deep dive into the Janus Capital Group, working closely with executives and investment leadership. We have tried to assess our strengths and opportunities, so we can develop a sustained and increasing value for our clients and our shareholders.

In addition to spending a lot of time in Denver, I have spent time with INTECH in Florida and Princeton; with Perkins in Chicago; and with our teams both in Europe and in Asia. I have talked with our clients, with consultants, as well as to many employees all over the world. My first conclusion is clear; I think we have a very healthy culture, and excellent people, and I am proud to be associated with this company.

What we need to do and you hear this in a resounding way, both internally and externally, to deliver a period of stable excellent execution and we have an increasing set of opportunities to capture. Our investment teams can go head-to-head with anyone out there. I believe we can take market share from our competitors in multiple channels. If there is an under performing equity manager out there we want to replace them, and our bottoms up fundamental bond strategies are a very good complement to many of the macro driven industry leaders on the fixed income side.

Our deep expertise in the United States as well as in global markets will continue to provide us with ample opportunities to increase our footprint in US retail and us institutional, in fixed income, and in non-US Market places. INTECH is clearly going through a very challenging period, but they represent a high quality source of risk controlled liquid non-core related alpha, which can and should have a sustained and important role in many clients asset allocation.

So our priorities fall naturally out of that vision. First we are an investment company, that’s what we are. Our most important job is to deliver superior long-term investment performance. We will continue to enable our investment teams at Janus, INTECH and Perkins as our highest priority.

Second, we have to increase our distribution, and we have opportunities to do so. In retail and intermediary our overall foot print is still modest, and there is a lot of room for us to grow. We are particularly focused on new opportunities in the RA channel and it’s regional broker dealers. We are investing in infrastructure to support future growth, also taking a number of concrete steps to strengthen our brand.

In the institutional space, the obvious and most crucial step is to work with INTECH to make sure they are delivering the best client service and communication that they can during this difficult period. We need to protect that base and grow it. At Janus and Perkins, we start with a very small base in institutional assets, and there are very significant opportunities to generate new traction. In particular, recently our fixed income products have been achieving success with some of the major consultants.

Third, we need to strategically develop our product offerings. We can expand and deepen what we offer in fixed income, in global equities, and also in some other asset classes and product types.

Fourth, we need to couple of success in these developments efforts with very strong business discipline. Over the next few years that should enable us to deliver sustained and consistent profit growth with the leaders of our industry, and that’s our goal.

Thank you very much for your time and attention, and operator we will now take questions.

Question-and-Answer-Session

Operator

(Operator Instructions) Your first question comes from the line of Roger Freeman.

Roger Freeman - Barclays Capital

Hi, good morning. I guess, let me first dig on your last comments there on the priorities. As you target the retail channel you said you have opportunities with the consultants, can you just delve into that a bit. So what is the process to get into these consulting firms and to get that, your name, your brand. It’s really like some branding exercise, but getting them to look at you as an institutional provider as opposed to the retail brand name that you carry.

Rick Weil

Right. As you know, well the institutional business in many markets around the world, the flow is dominated by consultants in the United States that really is true. There are major global consultants and then there are lots of local and regional consultants both in the US and outside. Those institutional buyers if you will, focus on the quality of your process, probably much more distinctly than simply your results.

In traditional sort of old time retail channels, it was very results focused, and you could watch flows follow our recent results in a very direct correlation. In institutional, the question is ‘show us the results, but also show us the process, that demonstrates that you can continue to deliver positive results going forward.’

So that process orientation and a heightened focus on risk management is I think a hallmark of the institutional process, and what we do is visit with all the key consultants. We have obvious folks who are dedicated to that channel here in our company, and we try and explain the various processes at INTECH, at Janus, and at Perkins, in a way that not only relates what our recent performance experience has been, but in a way that in detail describes how we generate that performance to provide them with the necessary confidence to put their trust in us on a going forward basis.

It’s a slightly different sale than traditional retail, but the trend that you see now as sort of modern retail focuses on asset allocation products, back programs and central buying centers, modern retail is actually looking much more like institutional on a go forward basis.

Roger Freeman - Barclays Capital

But I guess, I mean as you are going to talk of them, is there anything that’s sort of changed the value of your message or how you are describing the process. Is there a feedback coming from them about what you need to do, because this has been a focus for sometime already.

Rick Weil

100% of those meetings start with a sentence that goes something like this “We think your investment process is strong. We like you guys. We are very interested in your products and you need to show us the increased stability.” So that is the main thing that they would like to see, according to what they are telling me.

Roger Freeman - Barclays Capital

Okay, did I use up my follow-up already?

Rick Weil

I think so.

Roger Freeman - Barclays Capital

Okay.

Rick Weil

Thank you. Operator, next question.

Operator

And your next question comes from the line of Michael Kim

Michael Kim - Sandler O'Neill & Partners

Hey guys, good morning. Just first in terms of INTECH, what are some of the things that you are doing specifically in terms of working with them to retain clients and then ultimately start to reaccelerate sales?

Rick Weil

INTECH is very, very focused right now on client service and communication, and they have been conducting special road shows in efforts with consultants and clients, to ensure that they have absolutely the best information about what is happening, what has happened and why, and to try and give those people the necessary insight to stay with INTECH and continue on for what we hope and believe will be much better days going forward. So that’s been a huge effort on sort of business management and client facing side.

On the portfolio management side, they continue operate the process, they continue to study every aspect of what they are doing and try and learn lessons from the past, and that’s the major effort on the portfolio management side; and we are confident that those two things should deliver a better outcome going forward, and we are looking forward to that.

Michael Kim

Okay, and then in terms of margins. I guess on last quarter’s call you talked about maybe not hitting your 30% operating margin goal. This year just given the step-up in reinvestment spending, just curious whether or not that has changed more recently just given the fact that the markets have been generally favorable thus far this year, or is that maybe offset by some of the plans you laid out earlier as it relates to building out sales and IT and some of the other things?

Greg Frost

I think it’s a mix of what you just said. Clearly the markets given us a little wind, which is helping. Our long-term margin goals do not change and will not change. Remember that we’ve got roughly $10 millions of this fund to proxy related expenses in the first half of the year, so that will clearly depress margins for the second half of the year. The balance will be between kind of reinvesting back in the business, but any market lift we get is going to help offset that, so our long term goals don’t change.

Michael Kim

Okay, thanks for taking my questions.

Rick Weil

Thank you.

Operator

And your next question comes from the line of Jeff Hopson.

Jeff Hopson - Stifel Nicolaus & Company

Thanks a lot. So you mentioned doing a better job on the distribution. So I am wondering is it spend more money or spend more money effectively as we move forward?

Rick Weil

I think we have increasing opportunities on the retail side to grow our footprint in the US in intermediary market, and I think stability going forward will help tremendously with that. I think it’s easy to forget that Janus is compared to many of our competitors, relatively new in its focus on the retail intermediary space, and its only been the last several years that Janus turned away from the direct channel and focused on retail intermediary, and some of that time candidly has been spent focusing on some disruptive events, and so it hasn’t all been sort of steady progress.

So I think that’s the most important thing. We have some great people and we are making progress, but we need to continue that. We will also make investments. We are adding sales resources, we are adding to the technology and the information systems that underpin that business so we can be more targeted and informed, and we are taking steps to improve the brand position, and I think those things are investments that should contribute going forward, but if I had to cite one thing, I think a period of stable confident, you know improving execution will be the single driving factor.

Jeff Hopson - Stifel Nicolaus & Company

And when you talk about the stability, are you talking about investment personnel, financial results, what do you mean exactly there, or performance?

Rick Weil

I deal with of course all those things. I mean staying out of the front page of the newspaper in a negative context, not having major disruptions of our investment team and remaining focused on external events rather than turning our eyes into internal ones.

Jeff Hopson - Stifel Nicolaus & Company

Okay, thank you.

Rick Weil

Next question please.

Operator

And your next question comes from the line of Robert Lee

Robert Lee - Keefe, Bruyette & Woods

Thank you. Good morning. Maybe going back to INTECH, would it be possible to drill down a little bit if we look at the outflows there. Can you kind of update us on if there are particular strategies that are really seeing the lion’s share of outflows and maybe if there is any color you can give on kind of those remaining, I guess I’ll call it at risk assets, the size of those strategies that could be at risk.

Greg Frost

I don’t have that level of disclosure prepared for this call, but I can give you little more color in a slightly different way than you requested, so apologizes for that. The INTECH flows were less than half due to client terminations. They had faced head wins with some of their existing clients who weren’t terminating their relationships in terms of rebalancing towards global, towards fixed income, and so some of the industry trends I think are relevant to how you think about those flows.

We are seeing increased search activity starting to pick up and there is some particular interest in their enhanced index products, now that they are experiencing, but beyond that, I don’t have anymore for you on that subject.

Robert Lee - Keefe, Bruyette & Woods

Okay, I appreciate that. I think you kind of touched on this, but would it be possible to drill down a little bit deeper into some of the distribution initiatives. I mean one of the things that quite frankly I think has always been somewhat vague and opaque is the level of resources dedicated to various kind of distribution initiatives, to whether it’s number of wholesalers and things like that.

When you talk about building out an internal sales desk, is there one now; are we talking about adding like two or three people, or are we talking about kind of more wide spread investments in terms of head count going forward.

Greg Frost

This is Greg. Let me take a swing at it, and then may be Rick can add on. The level of external wholesalers won’t significantly change from where we are today, and I think we have talked before about a number of around 50, external wholesalers, and we are not anticipating that number to change significantly.

Rick did point out on his slide that we do want to invest in an internal sales desk which we see the industry moving towards, more interaction with our internal desk, we think that’s an important piece. That is not a that’s not a significant amount of spend, but is something that we think is important to do. I think the reality is on the retail side. We will be adding some target resources but not wholesale investment dollars.

Rick Weil

Yes, we don’t think the retail business going forward is driven by numbers of people in your wholesaling force, and that’s not our focus, and I think in concert with that we’ll need better information and targeting is essential and that’s why a much more significant spend is associated with the technology buildup.

Robert Lee - Keefe, Bruyette & Woods

Great, thank you.

Operator

And your next question comes from the line of Mark Irizarry

Mark Irizarry - Goldman Sachs

Great, just back on INTECH for a second. Can you give us a sense of the rate on the overall INTECH business, and also what the margins are on that business?

Rick Weil

I am sorry we don’t disclose that level of information.

Mark Irizarry - Goldman Sachs

Okay, and then also can you talk about the consultants and their view on INTECH. Are you still going to put us on watch with the consultants for INTECH. Are there any changes in the consultant relationship in the institutional channel with INTECH.

Rick Weil

Obviously the relationships with consultants is a big challenge, and number of consultants who have historically been very support are therefore connected to INTECH’s business in a material way.

They are asking hard questions, and they are challenged, but we don’t disclose individual consultants recommendations or anything like that, so I’m afraid I can’t go into detail. It’s an ongoing focused area for INTECH. They did a consultant road show recently and they are very focused on it, but beyond that I can’t go, I am sorry.

Mark Irizarry - Goldman Sachs

And then the tax rate was a little higher than would have expect for this quarter; what’s the right tax rate to think about for the rest of the year?

Greg Frost

The tax rate in the first quarter is what I would expect. What we saw in the fourth quarter were some very small state tax true-up’s that caused rate to decline a little bit. I think rest of the 35%; I think we are back in the 37%, 38% range which I would expect to continue.

Mark Irizarry - Goldman Sachs

Okay, thanks.

Operator

And your next question comes from the line of Bill Katz

Bill Katz - Citi

Yes, thank you. Good morning. I just wanted to come back to your long term margin goal, just sort of curious; some of your other retail centric platforms in this country are hoping to get to 30% margin overtime. I’m just sort of curious, given your incremental focus on the intermediary channel, whether or not that 30% margin goal might be optimistic.

Greg Frost

Bill, this is Greg. I’m thinking about that as a complex clearly, and you have got some higher margin business and are offsetting that, but we believe with smart growth as Rick talked about, we think with discipline in the business, we can certainly reach that goal.

Bill Katz - Citi

Okay, and the second question, just going back to page four of your prepared slides you talked a little bit about the wrong returns for Perkins. I was just wondering if you could maybe highlight what drove the recent underperformance if you will, and whether that should be a concern given that’s been a big driver to the flows in the most recent few quarters.

Greg Frost

At Perkins they are very focused as a sustained strategy on protecting against the downside, and they have done it extremely successfully. Part and parcel of that strategy I think you would expect, and certainly we do, that in a ragging bull market they would tend to under perform, and I think that pattern is consistent.

So we don’t see the recent underperformance in the face off, for instance in the midcap market more than a 60% trailing 12 months index performance. We don’t see some underperformance by the Perkins folks against that benchmark as surprising or standing on its own of great concern. That said, if you look at our performance on a constant basis, and we are always asking hard questions about whether we are making mistakes that we should fix, and Perkins is doing that everyday.

So I don’t want to act too cavalierly about short-term performance, you need to focus on it and address it in a serious way. But the pattern is not surprising to us and we don’t have a tremendous amount of concern and their long-term number remain so strong that we see them as continuing to be very successful.

Bill Katz - Citi

Okay, thank you.

Operator

And your next question comes from the line of Mike Carrier.

Mike Carrier- Deutsche Bank Securities

Thanks guys. One more question on INTECH. You gave some clarity just in April on the gross sales picking up better than the full quarter of the 500. In terms of the gross redemptions any update there.

Rick Weil

No, I am sorry I can’t give you any information on that.

Mike Carrier- Deutsche Bank Securities

Okay, and then just on the expenses, particularly the long-term incentive comp. I think on Perkins, like last quarter it was around $5 million to $10 millions in this quarter. It looks like if we added two together, it’s 12 to 14, you know obviously their performance in the flows have been good and you mentioned the assets are up 85% since the close. I’m just trying to get a sense of like what’s the key driver there, just in case we continue to see good performance like how high can that go or how low can it go?

Greg Frost

Sure, it’s a model based on revenue and performance. So the increase in the outlook for the year so to speak is primarily caused by the market rise and Perkins continues increase in assets under management. So as long as we see that, as I mentioned before, I would expect to see the number in 2010 a little higher than we had originally forecasted; and for out years, right now I would think $8 million to $10 million a year is appropriate, and I expect that to see the next two to three years.

Mike Carrier- Deutsche Bank Securities

Okay, thanks guys.

Operator

And your next question comes from the line of Cynthia Mayor.

Cynthia Mayor – Bank of America/Merrill Lynch

Hi, good morning. Just in terms of the May 25 close of the Perkins Small cap Fund, I just want to clarify; is that kind of a close that allows existing shareholders put money in, and do you expect sort of a rush of people trying to get in ahead of that close, and more generally what’s the outlook for Perkins developing more products to maybe stop up some of the demand.

Rick Weil

Well the closure that was announced on April 20 does not affect existing investors, existing or new planned participants and employee sponsored retirement plans that currently have the funds, or sponsors of certain wrap programs with already existing accounts in the fund. So I hope that’s clear an answer to your first question.

In terms of whether or not you see a rush to beat that deadline, I wouldn’t want to speculate. I think we just have to see. In terms of the outlook, we don’t give forward-looking guidance on flows, so I’m a little constrained about what to say. Greg.

Greg Frost

On the product side we launched large cap values, and it’s now reaching two to three year track records.

Rick Weil

That’s helpful. The large cap value is reaching a three-year track record and will hopefully garner the additional flows, and outside the United States they have an all-cap product that we hope will gather increasing interest.

Cynthia Mayor – Bank of America/Merrill Lynch

Do you have a sense of what star rating the merged capital will have when it reaches three years?

Rick Weil

No. I’m sorry I don’t have that for you.

Cynthia Mayor – Bank of America/Merrill Lynch

Okay. Can I ask one more question? Just getting back to the intake outflows, if you look at the flows, the redemptions this quarter, can you maybe discuss the typical lag times associated with the institutional redemptions?

For instance, if you look at the outflows, I don’t know if you could generalize, but these represent decisions that were made in November or January or later. I’m just trying to get a sense of how long it takes institutions to take the money out versus making this decision.

Rick Weil

I’ve seen this obviously for a short time here at Janice and I have some deep experience with it at my prior employer, it varies a lot. There isn’t a rule based on my experience I can give you. Some people work in a very process oriented system where you can say that changes to the portfolio go through a certain process which takes a certain time, and other people work in a much less structured environment.

So you have a range of possibilities that I couldn’t group for you. I appreciate the idea that you are trying very reasonably to get an assessment of the forward look, but I’m afraid I can’t give you an easy thumbnail for that one.

Cynthia Mayor – Bank of America/Merrill Lynch

Okay, thank you.

Operator

And your next question comes from the line of Ken Worthington.

Ken Worthington – JP Morgan

Hi, and thank you for taking my questions. First, I think Rick you mentioned the process and risk management. Are you satisfied with the risk management process at Janice or do you think there needs to be changes made to it?

Rick Weil

I think Janice has a very good risk management process that they have developed over recent years, which is on the model of risk manager as constructed coach or portfolio managers, not good cop, bad cop or anything like that. I think it works well in the Janice culture and for the Janice investors, but I would say I think the whole industry faces an increasing need to focus on risk adjusted returns and that certainly includes us.

So we’ll be exploring ways to advance our thinking in process in that area, but I have to be delicate about how to do that. The intersection of risk and reward is the heart of what a portfolio manager does for a living, and so it’s not an appropriate area for me to come in with hard boots and make bureaucratic rules, and I won’t.

Ken Worthington – JP Morgan

Great. And then, in your deck on page eight, I think the third global priority is to further develop the global equity and the fixed income products. Can you flush out more of what you are trying to do there and maybe give us more of a pathway from where you sit today to where you want to be at some point in the future?

Rick Weil

I’m sorry I’m going to frustrate you with that one. As you can imagine, we do have a pathway that we are working on and defining here, but we are not prepared to roll it out in this context. There is all sorts of SEC rules about not talking about funds and there are other constraints on it, so I apologize for frustrating you, but yes, we are excited about the plans we are developing.

Ken Worthington – JP Morgan

Okay, thank you very much.

Operator

And there are no further questions in the queue.

Rick Weil

Thank you very much everybody for your time and attention. That’s it. Good bye.

Operator

And this concludes today’s conference call. You may now disconnect.

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Source: Janus Capital Group Inc. Q1 2010 Earnings Call Transcript
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