The move by PERA comes after the board’s investment advisory committee prepared a memo for the full board recommending the removal of Janus options for the 71,000 PERA members. In addition, the memo cites the mutual fund company’s performance and fund manager turnover in the past year, according to a Rocky Mountain News report.
In all, the move, slated for March 2004, will impact $30 million of the $828 million in PERA’s 401(k) plan that was invested in the Janus Fund, which was one of 16 funds offered. Overall, the bulk of PERA’s assets are in its $27 billion defined benefit plan.
Further, the investment advisory committee’s note points to allegations that Janus allowed embattled hedge fund Canary Capital Partners, to engage in frequent trading of its mutual funds are “a substantial negative development for the firm and are a possible indication of poor policies.”
The move by PERA echoesearlier calls by Morningstar for investors to dump their shares in the four affected funds caught in the wake of charges by New York State Attorney General Eliot Spitzer (See Morningstar Cautions Investors in Wake of Canary Scandal ). Even though the research firm had harsh words for Bank of America, Janus, Strong, and Bank One, especially scathing remarks were reserved for Janus.
Including in the harsh treatment was a strongly worded commentary by analyst Brian Portnoy charging that Janus put its own profitability ahead of the interests of investors in its funds. Portnoy also cited poor performance of Janus funds in the bear market and a string of management departures – the combination of which constituted “three strikes” against the Denver-based fund.
PERA is at least the second big investor to pull money from Janus since the improper trading allegations came to light. Standard Insurance Co.’s retirement plan division said in late September that it would pull its clients’ assets out of Janus mutual funds and stop offering the funds (See Standard Insurance Drops Janus Funds From Retirement Plans ).