(FORTUNE Magazine) - Janus Capital Markets (Research), named for the Roman god with two faces, is trying to show its best side to investors.

In January the firm's CEO, Gary Black, removed Blaine Rollins as manager of its flagship Janus fund and replaced him with David Corkins, a ten-year veteran of the firm. The change is long overdue. The Janus fund had become something of an embarrassment under Rollins, losing an average of nearly 7% a year since he took it over in 2000, putting it in the bottom 20% of all large-company growth funds, according to Morningstar.

Corkins, by contrast, has shown a knack for stock picking. Most recently he ran Janus Mercury, another large-cap growth offering. During his nearly three-year tenure, he returned 18% a year, beating more than 70% of his peers. "Corkins is arguably Janus's best manager," says Morningstar analyst Dan McNeela. "Not only has he taken advantage of opportunities during bull markets, but he played better defense during bear markets." (A team led by Janus research director Jim Goff will now pilot Mercury.)

The manager shift is the latest step in Black's campaign to return the Denver company to its former glory. Janus briefly became the hottest mutual-fund company in the land during the bull market of the late 1990s. But its funds--many of which held big positions in the same handful of pricey growth stocks--suffered disastrous losses in the 2000 market crash. Things got worse from there.

In September 2003 it became one of the first companies implicated by New York attorney general Eliot Spitzer in the market-timing scandal with hedge fund Canary Capital Partners--a matter that eventually cost Janus $226 million to settle with regulators. With his firm in turmoil, Tom Bailey, Janus' eccentric founder, retired in July 2002; CEO Mark Whiston and star fund manager Helen Young Hayes departed shortly thereafter.

Janus's troubles certainly repelled investors. A combination of market losses and customer withdrawals cut Janus's assets under management by more than half, from a peak of $330 billion in March of 2000--just as the market was topping out--to $137 billion at the end of 2002. Once the nation's fifth-largest fund company, Janus now ranks at a lowly 16.

A former securities analyst, Black has bolstered Janus's research department. The firm now employs 33 analysts, up from 20 in 1999. And he has tied fund managers' pay more closely to performance. (In the past, Janus came under fire for rewarding managers based on the revenue generated by their funds.)

Black's most telling move, however, was to hire a director of risk management--Dan Scherman, a 13-year veteran from financial giant MFS. Among other things, Scherman, who joined Janus in March 2005, meets with fund managers to make sure they aren't loading up on the same stocks. That's a big change for a firm that prides itself on its gunslinging investment style. But Black insists that fund managers still have the final say on what stocks wind up in their portfolios. "We're not changing the culture," Black says. "We're still about high-conviction investing. But we needed to add a dose of discipline to make sure we never go through what we did in 2000."

So far the recipe seems right. The typical Janus fund is beating 60% of the funds in its category, based on three-year returns. That's right up there with top fund families such as Vanguard, T. Rowe Price, and Capital Research's American Funds. The firm's top performer during that time period is Janus Contrarian, a flexible portfolio run by David Decker that invests in a broad mix of securities. Thanks to a big bet on Indian stocks, the $3.4 billion fund has gained an average of 32% annually over the past three years.

But Black still has plenty of work to do, as he freely admits. For example, the firm's biggest international stock fund, Janus Worldwide, run by Jason Yee since 2004, still ranks at the very bottom of its category. One big test of whether Janus has learned from its mistakes will come during the next bear market--whenever it arrives. Black says Janus is ready. "We've injected very strong valuation discipline into all our portfolios," Black says. "Our biggest debates at every research meeting are about stocks that [are] approaching our valuation targets, trying to make sure they're still attractively valued even though they've run up. Our No. 1 focus is to keep our performance strong and consistent in both up and down markets."