Janus manager Blaine Rollins sticks with the style that made the fund famous.

The migration of Janus toward a value-oriented investment focus has been picking up steam in recent months.

After gaining a reputation as the premiere destination for growth stock investors in the late 1990s, the fund family dipped a toe in the value pool with the introduction of Janus Strategic Value Fund in 2000 and the Janus Global Value Fund in 2001. The shift in strategic direction went into full throttle in December 2002, when the firm announced plans to take a 30% ownership stake in value manager Perkins, Wolf, McDonnell and Co., which manages approximately $5 billion worth of small- and mid-cap value funds for the Berger family. Pending approval from Berger shareholders, Janus will bring three of those funds into its own line-up, complementing two of its own brand-new value offerings launched in December.

In the midst of all this re-tooling, most people still view Janus as a growth shop and its flagship Janus Fund as the cornerstone of that investment philosophy. The question now is whether today's more conservative market climate, and the introduction of several new value funds, will leave a mark on the large-company growth strategy that helped make Janus Fund a household name.

In some ways, the fund that re-opened its doors on December 31, 2002, looks quite different from the one that closed to new investors in September 2000. To avoid heavy-bet mishaps such as AOL Time Warner, 35-year-old manager Blaine Rollins says he will try to limit individual stock positions to no more than about 5% of assets. (His largest holding, Comcast, accounts for 6% of the portfolio.)

He also has adjusted to the tepid economic climate by going beyond technology bets to more mundane companies whose mid-teens growth rates would have barely put a blip on his radar screen three years ago. And, he believes that he can leverage the knowledge that Perkins, Wolf, McDonnell and Co. bring to the table to benefit the Janus Fund. "I hope to work with them to identify value companies because sometimes they re-emerge as growth stories," he says.

Even with these changes, Rollins makes it clear that Janus Fund remains a bastion for investors who believe that despite recent setbacks, growth stocks will dust the competition over the long haul. "I want to own companies that are gaining market share and have great franchises because they are capable of generating better long-term earnings growth than the overall market," says Rollins. "Right now, we're seeing some opportunities to buy some great growth franchises."

Few fund companies put those words into practice as well as Janus did during the late 1990s. Its managers' penchant for rapidly growing companies, especially in the technology sector, helped catapult Janus Fund and other funds in the Janus family to the top of the performance charts. But internal turmoil accompanied investment success. In late 1999, Janus chief investment officer Jim Craig announced he would step down as manager of Janus Fund. He left the firm the following year amidst controversy surrounding Janus' widely-publicized disagreement with parent company Kansas City Southern over the terms of a spin-off with the railroad's other financial service units.

Rollins, who joined Janus in 1990 as an analyst and had managed Janus Balanced Fund and Janus Equity Income Fund since 1996, made few changes to Janus Fund when he first took over in January 2000. He maintained the heavy weighting in technology and telecommunications stocks established by his predecessor, even as those sectors began falling victim to the nascent tech wreck in the spring. Though he established marginal positions in more defensive consumer-oriented stocks such as Colgate Palmolive later in the year, it was not enough to offset the heavy losses sustained by the more aggressive side of the portfolio.

Still, money poured in at such a rapid clip in 1999 and 2000 that almost half of the family's funds closed to new investors during that time. By the time Janus Fund closed, it had swollen to about $50 billion in assets, accounting for a sizable chunk of the $318 billion in all Janus mutual funds.

They remained closed until the beginning of this year, when four funds-Janus Fund, Janus Worldwide Fund, Janus Global Life Sciences Fund and Janus Global Technology Fund-reopened their doors. Rollins characterizes the years Janus Fund was shuttered as "a challenging investment environment that was reflected in the performance of the fund."

Challenging indeed. Soon after the closing, the environment for the technology stocks that helped make Janus a premiere growth-stock destination turned deadly. A heavy concentration in media, airline and hotel companies took its toll in 2001, when the fund fell 26%. In 2002, severe downturns in beleaguered fund holdings such as Tyco International, Enron and Bank of New York contributed to the fund's 27.6% drop for the year-more precipitous than the 22% plunge for the S&P 500 Index, but about average for Morningstar's large-cap growth category.

Through it all, Janus Fund investors remained surprisingly loyal. Between September 1, 2000, and November 30, 2002, only $6.7 billion of the $33.85 billion in assets the fund lost over the period was attributable to net shareholder outflows, according to Financial Research Corp.

By the end of 2002, Janus Fund had $17 billion in assets. Rollins says that he and other Janus managers advocated for the re-openings to bring new money in for investment. "We saw some companies with great core franchises selling at great prices, and we wanted to take advantage of those buying opportunities," he says. (Janus 2 Fund, launched in December 2000 as an alternative to the closed Janus Fund, is merging with its namesake.)

While the re-openings will provide fresh money for investment and help managers avoid liquidating stocks to meet redemptions, too much of it-an unlikely scenario for now, at least-could lead to the kind of unwieldy asset base that the fund had three years ago. Janus hasn't set a limit on the fund's assets or announced a closing date at this point. Rollins has modest expectations, noting simply that it would "be nice to have a trickle of cash coming into the bathtub, instead of being in a slow liquidation mode."

Aside from creating buying opportunities, the punishing environment does have a couple of silver linings, including the benefit of hindsight. "During the bull market, the rising tide lifted all boats," says Rollins. "It wasn't until the tide went out that we could really separate the winners from the losers."

Though it remains to be seen how those winners may fare, shareholders won't feel any capital gains pain for quite awhile if they do fulfill their promise. "We have about $10 in realized losses for every Janus Fund share," says Rollins. "Based on the recent net asset value of $19 a share, that means the first 50% or so of upside will essentially be tax-free." Not surprisingly, more than a few funds possess the same upside these days.

Another advantage of a smaller asset base, says Rollins, is more flexibility to step out of large-company territory from time to time. "I like to pepper the bottom half of the portfolio with small- and mid-size names. When the fund had $50 billion in assets, I lost that ability. Now, if I can get a $50 million stock allocation from a smaller name, that's .3% to .4% of the portfolio. If that stock doubles or triples over the next few years, it can have a real impact on performance."

The fund remains a large-company offering, however, since it must have at least 75% of its assets in companies with market capitalizations of $8.5 billion or more. It is also big enough to keep its expense ratio at 83 basis points, below most growth funds.

At 21% of assets, holdings in the media and cable industries constitute the largest sector allocation. "The primary reason I love media companies is that they are not capital intensive," he says. "Billboard companies or radio station operators don't require much capital to generate revenues." Companies in those industries include fund holdings Clear Channel Communications and Hispanic Broadcasting Corp. Diversified media giant Viacom, Janus' second-largest holding, owns cable television properties such as MTV and Nickelodeon, as well as the Infinity Radio Group. The company is using its rising free cash flow to buy back stock and build its balance sheet.

Newcomers to the fund include Apollo Group, which operates the University of Phoenix online degree program and owns the College For Financial Planning. The company, which has substantial free cash flow, "offers students a reasonably priced education option while maintaining solid margins." Rollins recently increased the fund's position in Colgate-Palmolive, which has posted solid earnings despite a weak economy. And he has pared, but not eliminated, his stake in Tyco International. As long as the company's valuation is attractive, he says, he is willing to wait for a turnaround.

For patient investors, a turnaround for Janus Fund may be worth the wait as well, according to Morningstar analyst Brian Portnoy. In he recent report, he notes that despite recent blowouts in holdings such as Tyco and Tenet Healthcare, Janus Fund remains a "decent option" for large-growth exposure. "It's bull-market performance and sufficiently solid showings during bear-market growth rallies indicate the fund should stay in the hunt when the market one day smiles again on growth-oriented investing."