Shares of Janus were down nearly 4 percent in morning trading. The stock had gained more than most peers this year as rising markets kindled enthusiasm for the company's equity-heavy asset base.
Assets under management rose to $164 billion at March 31 from $148 billion at Dec. 31, driven by market appreciation of $18.3 billion.
But outflows of $2.5 billion from long-term funds partly offset the market appreciation and reflected Janus' persistent performance troubles.
Only 39 percent of mutual fund assets in fundamental equity strategies ranked in the top half of their categories in the year ended March 31, according to fund tracker Lipper, and only 32 percent have done so over the past three years.
Janus' fortunes now are more directly tied to the funds' track records. The quarter marked the first when the company fully implemented new performance fees designed to align its interests with those of fund investors. These reduced revenue by $19 million in the first quarter, compared with a reduction of $9.2 million in the fourth quarter.
With many equity funds and strategies underperforming, the new fee structure meant that the higher assets had "the effect of compounding the performance fee dynamic, in this case, to the downside," Jefferies & Co analyst Daniel Fannon wrote in a note to investors.
Including the performance fees, revenue fell to $218 million during the quarter, compared with $265 million a year earlier.
Another reason for the decline was investment management fees, which fell to $202 million from $225 million a year earlier. Investment management fees were still higher than the $191 million from the fourth quarter.
The Denver asset manager reported first-quarter net income of $22.6 million, or 12 cents per share, down from $37.9 million, or 21 cents per share, a year earlier.
The results included a charge of 3 cents per share for debt and compensation changes. Excluding the charge, analysts surveyed by Thomson Reuters I/B/E/S on average expected a profit of 16 cents per share.
Shares of Janus were down 3.9 percent at $7.62 on the New York Stock Exchange.
(Reporting By Ross Kerber; Editing by John Picinich and Lisa Von Ahn)
Copyright 2010 by Reuters. All rights reserved.