CXO: Catalyst for capital

About Janus Capital Group:

Janus is a leading multi-class asset manager with USD174.4 billion in assets under management, offering complementary asset management disciplines to individual investors and institutional clients through the firm's global distribution network.

Journal: Thank you for taking over the CXO relay from Helmut Paulus, CEO and CIO, Quoniam Asset Management. To begin, please describe your responsibilities at Janus.

George Batejan: I’m responsible for Global Technology and Operations (GTO), with 480 employees and all of Janus’ activities covering technology, operations, facilities, purchasing, and security. GTO is structured along three dimensions. One supports the enterprise at large with IT, the Corporate Project Office, and Operational Risk and Process Management. The second dimension involves product operations split into mutual fund processing, where ’40 Act-registered products are handled, and support for our unregistered products such as separate accounts and comingled pools. The third line focuses on two of our core business units: The investment process (handling everything from reference data for making investment decisions through trade support, post trade processing, securities pricing, proxies, and corporate actions management); and distribution that covers commission processing, intermediary back-office support, and sales data stewardship.

Journal: Running on from that, please give our global readership a snapshot of Janus.

George Batejan: Janus distributes products through several channels. While Janus decided to stop selling mutual funds directly to end-investors several years ago, we still have close to one million direct shareholders. We also distribute products through our retail intermediary channel, where we sell through all the firms you might be familiar with: Merrill Lynch, Raymond James, etc. Then we have an institutional channel, where our focus is on institutions, DCIO plans, and so forth. Our distribution channels span the globe, our main office is in Denver, we have local offices around the world, and subsidiaries in the USA. In terms of asset classes, we obviously support equity. Janus was known, and probably still is to some extent, as an equity investment manager and that certainly is a large part of our business. What sometimes goes unnoticed, however, is that we also have a sizeable fixed-income book of business, particularly around credit-based bottom-up fixed-income investing. We also do alternatives and we recently launched our macro fixed-income capability with Bill Gross, and we’re very excited about that.

Journal: Exploring this a little more, what differentiates Janus from other fund managers?

George Batejan: One of the things that differentiate Janus is something that many firms say they do but don’t really – we are truly client-focused. In fact, we have an award-winning program for client value statements and put every employee through client training. Every employee has a statement describing what he or she must do to deliver better outcomes or better support to our clients. Many of our key technology projects revolve around improving client experience and we set priorities based on generating favorable client outcomes. Many firms may talk about it, but I think Janus really does try to live it every day. I believe our organizational culture also differentiates us. We conduct an annual employee survey where we ask employees to provide three words describing their experiences at Janus. We have had a phenomenal response rate in the neighborhood of 94-95%, and words like “friendly”, “hard-working”, and “collaborative” are among the most often mentioned. I think this says a lot about the positive attitude our employees bring to work every day.

Journal: Going back to the client value statement, please give an example of this.

George Batejan: My own is: “I strive to ensure that our clients view Janus as the leader in service delivery with our every interaction”. We constantly look for process improvements that generate real and sustained client benefit – this is core to everything we do. We went through an exercise in GTO using the concept of six degrees of separation and there wasn’t anyone who was more than two degrees separated from the client. This meant they were probably supporting or providing information to someone who was ultimately providing it to the client. An example of our client dedication is net asset value (NAV) processing. When you talk to our intermediary partners, you find they like to see our NAVs delivered to them early and accurate enough to let them kick off their processes. Our ability to create and send accurate NAVs early is a key client requirement. Because we focused on this need, there’s no other firm that’s beating us in terms of timely NAV delivery. In fact, at a recent conference with a key intermediary partner, we were singled out for going from 20th to first place in timely NAV delivery over the course of a few months.

Journal: In terms of Janus’ overall business objectives, what role does technology play?

George Batejan: An investment firm needs two things to succeed. One is that its portfolio managers must generate positive alpha. If you’re not outperforming, then why would anyone want to invest with you? If you’re delivering good performance, then the next thing is that your distribution function has to be running on all cylinders, and go all out to sell the products you’ve developed that hopefully beat the competition’s. So GTO mostly focuses on these two elements. What can we do to help our investment managers make better investment decisions and how can we help our sales force be more successful in distributing Janus products? For our investments and distribution to succeed, we aim to ensure we provide them with consistent, accurate, and timely data. We try to make sure they’ve got the right kind of tools to analyze and determine their investment choices. We’ve spent a fair amount of time developing what we like to think of as some leading-edge tools that support our equity and fixed-income businesses.

Journal: You talked about typical front-office functions like sales and distribution. With those in mind, could you drill down to describe the key components of Janus’ Technology and Operations strategy in support of the front office?

George Batejan: I would say one key component is developing these cutting-edge tools for the portfolio managers. For example, we give our fixed-income portfolio managers a tool that allows them to evaluate the relative value they see in a bond. We take external research and our own proprietary credit-based research and blend these together to give them a view of whether or not a particular bond is expensive or cheap. Based on our investment process and research, we may look at a certain bond a bit differently than the market and conclude that it’s cheap relative to its value. That’s the kind of tools that provide our investment managers with better insights into where they should focus their buying or selling decisions. That’s true on the equity side too. Obviously, data is also crucial for the business and it’s essential for our portfolio managers. So we’ve spent a fair amount of time creating golden copy records of all our key data sources, whether it’s on the distribution or the investment side.

Journal: Could you talk a little more about how you work with partners in providing the best possible technology to the firm?

George Batejan: What we have to provide the firm in the way of technology is multi-faceted – there’s not necessarily one answer. If you’re trying to optimize things from the IT perspective, in my experience, you’re sub-optimizing things from the standpoint of the business. From our perspective, we try to optimize IT from the standpoint of how the business looks at IT, not from how IT looks at IT. I’d rather be a little sub-optimal from an IT perspective but more optimal from the business standpoint. Some IT leaders might think “I could be more efficient if I centralize development resources, because then I could share code more and not re-invent the wheel over and over”. The problem with that thinking is that it’s generally less effective in supporting many different business units. Things tend to take longer as development becomes more serial and less parallel. From an external partner perspective, we deal with a couple of key vendors. Our transfer agent system is outsourced; we use some packaged software for our trading platform; and we have SimCorp Dimension for our investment book of record (IBOR). When I was talking earlier about Janus being client-focused, that’s also what I expect and demand from our vendors. I need them to provide the same quality and speed that my own internal business units expect of my internal IT group.

Journal: Going on from that, how does this strategy help Janus in driving growth, mitigating risk, and containing costs? Can you give us any metrics?

George Batejan: As you can imagine in a group like ours, we have hundreds of metrics. To make these metrics a little more meaningful and comprehensible, we’ve created a series of three indexes for quality, productivity, and client value. We wanted something that everyone, including those outside of GTO, could easily relate to. We thought about the Dow or S&P and how everyone knew if those indices went up, it was good and if they went down, it was bad. We therefore combined several metrics to create an index that’s on a scale of 10,000. You can look at each index and know if it went up, that’s a good thing; you don’t have to look at a hundred metrics to try and figure out whether you’re making overall improvement. Timeliness, accuracy, number of errors in institutional client reporting statements are some examples of metrics fed into the client service index, so when you see it going from 9,800 to 9,820 – that’s a good day in the client service department.

Journal: What are some of the key areas within technology and operations that fund managers should be investing in and why?

George Batejan: What’s critically important in my view is the alignment between business and IT. The firm’s investment department is the engine that drives the business. IT people need to think less about being part of the technology group and more about being part of the business. How IT is structured and providing support to the business is key to success. That’s why IT exists. It does not exist for its own sake; it exists to help move the business forward. It’s always surprised me that in every investment firm I’ve worked how unfocused their technology team initially was on the core of the business, the investment area. In fact, even in CTO conferences I’ve attended, it’s rare to hear anyone talking about what they’re doing to support their portfolio managers. They tend to talk about “big data”, or mobile technology, or a host of other IT-centric ideas and not how any of that is important to making better investment choices. I’m not saying those ideas are unimportant but they are only meaningful when they help propel the business forward. In my experience, portfolio managers really want to focus on making investment decisions and managing a portfolio. So making sure that portfolio managers have all the tools they need is crucial. IT can play a huge role here and in doing so becomes a critical partner in the success of the firm.

Journal: Janus has been in the media a lot with Bill Gross joining the firm. What, in your view, does this appointment mean for GTO at Janus? Does anything change?

George Batejan: It’s certainly boosted energy in the firm. Everyone’s excited and pleased that Bill chose Janus to start the next stage of his remarkable career. Let’s face it, he’s a legend. Fortunately, we have an infrastructure that allowed us to support Bill from the first day. We’ve had to do some tweaks here and there for him. He likes to look at information in a certain way, so we had to deliver certain risk reports in a different format. But they’re tweaks as opposed to fundamentally shaking up the entire GTO infrastructure.

Journal: Summing up, with such an impressive career spanning over three decades with high-profile tenures at Evergreen, Oppenheimer Funds, and Chase Manhattan Bank, what would you characterize as your key achievements during your long professional life?

George Batejan: I’ve really enjoyed the investment world a lot because, while the firms tend to be smaller, you can get to know everybody and you can really shape things and make a difference. What I’ve always been most proud of is probably my ability to build highly functioning teams. For me, leadership is about leverage. If I do a slightly better job, then my direct reports will do a slightly better job; and if they do a slightly better job, then everybody working for them will do a slightly better job. So I’ve the ability to impact how well close to 500 people at Janus perform every day, and to me teamwork is the most important aspect of that.

Journal: Thank you for your insights. To continue the dialogue, whom would you like to hand over the relay to in the next CXO Corner?

George Batejan: I would like to hand over the word to David Eckert, ‎Managing Director, CIO, Operations Head, Corporate Real Estate at Neuberger Berman, whom I’m sure with his considerable professional experience will have some great things to say about what he views as the biggest challenges facing the industry going forward.