Some people can't stop themselves from looking for storm clouds when they are on the beach in the middle of a sunny day.
So it is with many shareholders in the Janus funds, who have been thrilled and amazed by terrific returns but who fear the party could be over depending on which side wins a nasty battle for control of America's hottest fund company.
If you are a Janus shareholder, the situation bears watching and not much else. This fight is out of the realm of shareholders, who will have no say whatsoever in the outcome, and does not affect day-to-day management of the funds - at least for now.
Here's the situation:
Janus is one of several financial services operations owned or controlled by Kansas City Southern, a railroad company. Since last year, Kansas City Southern has been trying to spin off those holdings - including the Berger funds, data-processing/transfer agency firm DST Systems, a British money management firm, and its 82 percent stake in Janus - into one separate entity, which it calls Stilwell Financial.
The sticking point to this spinoff is Janus, which opposes the move. Janus executives - and you'll be hard-pressed to find any discussing this situation on the record - believe that Janus would be better off on its own, unencumbered by the other, less attractive companies.
They have a point. Janus revenue for the most recent quarter was $523 million, or more than 30 times what the struggling Berger family delivered. It has enormous operating margins (which in plain English means it is hugely profitable). At a time when most fund companies are struggling to retain assets, let alone grow, Janus pulled in more than $40 billion during the quarter.
The most notable opposition to the plan comes from Tom Bailey, Janus' chairman, chief executive and president, and the guy who built the organization into what it is today. When Janus was sold to the railroad company, Bailey inserted a little clause in the contract that essentially said he could not be fired.
Kansas City Southern, meanwhile, insists that the sale of the entire Stilwell unit is the most tax-efficient and profitable move for the company. There's probably some truth to that, too, since the rest of the assets in this mix are not that attractive (the company paid a lot more money for Berger and with a much smaller return).
So when Kansas City Southern issued its most recent annual report, it noted its belief that the company can fire Bailey, adding that "the removal of Mr. Bailey would not result in significant harm to the company."
The validity of the claim over the right to fire Bailey would be hashed out by lawyers, but the statement shows that Kansas City Southern believes that golden handcuffs would keep the fund family's money managers in place if Bailey were canned. (Bailey himself hasn't managed funds for years.) The railroad firm also is hoping for a repeat of history; popular manager Tom Marsico left Janus a few years ago in a control fight, and the company and its funds went on stronger than ever (though Marsico did start his own successful fund family).
Truth be told, Janus managers may be able to leave if Bailey goes. There are rumors - well-sourced, but I have never seen the actual documents - of manager contracts that include an escape clause if Bailey gets canned.
Kansas City Southern has no plans to ax Bailey - a fact it reiterated since publishing the report.
It was just flexing its muscles for the crowd."It's the Hatfields and McCoys in very real terms," says industry observer Geoff Bobroff of Bobroff Consulting in East Greenwich, R.I. "There is little, if any, love between the two parties. But at the end of the day, the Kansas City Southern people have left Janus pretty much alone to do their thing, and I think this is about trying to structure a deal that lets that continue to happen so that Janus does not wind up belonging to some insurance or banking firm that wants to meddle with the business."
For investors, the whole situation makes for interesting melodrama but should not spur decisions or moves. It's business as usual for the Janus funds, no matter how wacky things are in the boardroom.
What's more, it will be months before the control problems are settled, and longer before any possible management turnover gets sorted out to the point at which an investor should consider making a change.
"It's exceptional that you see this kind of trouble at the shop that is the envy of the fund world," says Russel Kinnel, director of fund analysis at Morningstar Inc. "But this really shouldn't scare investors right now. Sit tight unless managers start bolting, and that's not a real likely scenario right now."
Charles A. Jaffe is mutual funds columnist at the Boston Globe. He can be reached c/o the Boston Globe, Box 2378, Boston, Mass. 02107-2378 or via-email at email@example.com.