Was Janus just the poster child of the late Nineties boom? Or will it remain a force in the fund industry going forward? That is the question in the balance as the firm undergoes a transition from a go-go growth shop to a mature and diversified business. The long-term answer may be determined by what happens in the coming months.

One thing is becoming clear, Janus is likely to move in a new direction under the hands of new leaders. Thomas Bailey, founder of the firm, is clearly on his way out. The retail investment-centered publications are also already speculating on how many of Janus' investment team will remain with the firm.

This morning Stilwell is putting together financing to purchase the remainder of Bailey's holdings in Janus valued at $603 million. The deal will involve Bailey selling 600,000 shares to Stilwell over the next four months.

The buyout is not a surprise as Bailey was left with a Hobson's choice of either selling his remaining stake at a price based on last year's assets under management at Janus or holding on and facing a likely lower valuation based on future asset levels.

Bailey himself said in a statement that he will stay on as the firm's chief executive officer. However, Bailey's ongoing commitment to the firm would seem in doubt based on the widely reported disagreements he has had with Stilwell officials, his seeming lack of enthusiasm for the job and his place in the human lifecycle.

Even if Bailey stays on the deal will likely be the final seal on the drawn out end of an era.

Janus was able to build its asset base into the third largest in the industry through a reliance on a small number of holdings spread across a small number of funds. Even before the Nasdaq crashed and took down the fund's performance Janus executives had awakened to the firm's vulnerability and started to diversify its business.

The Denver-based firm had started to woo financial advisors and institutional clients to diversify its sales efforts. It had also started to diversify its product line by bringing out new products such as its value fund. Yet, both advisors and institutional clients were attracted by the same performance that had attracted retail investors. Its value offerings have failed to catch on.

Janus may have even harmed these efforts through an arrogant advertising campaign that promoted the firm's ability to research stocks better than competitors. It would now be fair for those investors to ask why the vaunted Janus analysts failed to see the massive wipe-out of shareholder wealth coming if the campaign was to be believed. In light of those ads, the next shoe to drop would be the departure of high profile analysts. If that happens institutional investors may be quick to reevaluate their mandates with the firm.

The willingness of many of these investors to follow Tom Marsico when he left Janus to found his own firm shows that they may be more loyal to the manager than the brand. Ironically, more poorly informed retail investors would be more likely to stay the course in this case.

What Janus failed to do while the sun shone was to build the hooks into this business that firms such as Fidelity and Vanguard have carefully put in place. The key to retaining clients in these lean times it to provide services to clients beyond finding hot stocks. For institutional clients these services include providing technology, adminsitration and even consulting services.

Both Fidelity and Vanguard built the 401(k) business into a rock of stability by crafting top-notch, full-service businesses that rarely lose a client. Fidelity is now leveraging those abilities to win pension clients and move beyond its core. Janus abandoned its own full-service business early in the game and has instead relied on its early placement as an investment-only alliance partner in the plans of many Fortune 500 firms. Those spots come under attack as its performance track record sinks.

The Boston Behemoth also built a widely diverse product base that includes recognized abilities in fixed income assets and vulture investing that were out of favor the past half-decade. Vanguard, on the other hand, has built its brand from something that it can actually control, namely the cost structure of its funds.

The Janus brand will not go away anytime soon, but its moment as a special name in the fund industry has past. There is nothing unique there.  

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