Nov. 4–Janus Capital Group Inc. announced earnings last week but said the numbers might change significantly before the official report prints Nov. 14.
That’s the day the Denver-based mutual fund company plans to file its quarterly financial update with the Securities and Exchange Commission. Wednesday’s announcement was merely the press release version of earnings.
Janus said its final numbers depend on whether it learns new information. The news would show how much investors in Janus’ funds were harmed by market timing activities in the funds. Market timing involves repeatedly buying and selling fund shares to take advantage of poorly priced funds.
Janus was among four fund groups that New York Attorney General Eliot Spitzer named Sept. 3 in his civil complaint against a market-timing hedge fund.
Two days later, Janus Chief Executive Officer Mark Whiston said the fund company would make shareholders whole for any losses caused by market timing in their funds. Trustees representing the funds then hired Ernst & Young to calculate that total.
Janus’ earnings report last week showed that the company already counts $9 million in expenses to cover the costs of the market timing activity and investigation so far.
It said $1 million represents fees it earned from the timers. It said $3 million covers its legal bills.
The remaining $5 million represents redemption fees the market timers would have owed the funds had Janus not waived the fees.
Redemption fees are intended to thwart market timers by charging a toll to exit a fund within the first month or so, depending on the fund’s specific fee.
Janus expects the trustees to ask for that $5 million, and possibly significantly more, said Loren Starr, chief financial officer, in a conference call with stock analysts.
If the trustees provide that larger number before the Nov. 14 quarterly filing, Janus will add it to the drain on third-quarter earnings. If not, the added expense will be recorded in the fourth quarter.
As it is, Janus said the $9 million market timing charge, plus others, left the company with $50.9 million in third-quarter profits.
Janus shares jumped 6.8 percent on the day of the earnings news. They gained 19 cents on Monday, closing at $14.33.
Because of the investigation, Janus has postponed a long-planned advertising campaign. The ads tout Janus’ family of brands, including Bay Isle, Intech and Perkins, Wolf, McDonnell & Co.
Whiston said the ad campaign remained at the ready but on hold.
“I want to make sure I get my bang for the buck, and that time’s not now,” he said.
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