Can’t go wrong with this one Gross Gives Janus Much-Needed Shot in the Arm
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Gross Gives Janus Much-Needed Shot in the Arm
By: Jeff Benjamin
Just like that, Janus Capital Group Inc. has become a fresh new face in the bond fund universe with the abrupt and unexpected signing of Pimco co-founder and fixed-income guru Bill Gross.
“The market sees this as a huge shot in the arm for Janus,” said Jeff Tjornehoj, head of Lipper Americas Research, citing the early 35% spike in Janus’ stock price today.
With just $13 billion in total bond fund assets, compared with $67.8 billion in equity fund assets, Janus is still small potatoes for Mr. Gross, who is used to dealing in trillions at Pacific Investment Management Co. But the trend is certainly on his side, with Janus’ bond funds seeing $1.1 billion in net inflows this year, while the firm’s stock funds have had net outflows of $6.6 billion.
“I think this is big news for Janus,” said Todd Rosenbluth, director of ETF and mutual fund research at S&P Capital IQ.
“While they have a strong fixed-income set of funds, this should certainly encourage more investors to want to work with Janus than before,” he added. “Janus has long been known for their equity mutual funds, but Bill Gross brings instant credibility and a strong long-term record in the fixed income market.”
Even though Wall Street nodded immediate approval of the sudden move by the 70-year-old bond king, financial advisers appear more comfortable waiting to see what kind of impact Mr. Gross will have on a company that has mostly been off the radar screen for the past decade.
“We don’t invest in any Janus funds right now, but this will certainly put them on our watch list,” said Chard Carlson, director research and wealth manager at Balasa Dinverno Foltz. “Janus wouldn’t have even registered in my mind as a bond shop, so this should generate some benefits for them.”
In terms of seeing such an industry legend take what initially looks like a subordinate role at a much smaller firm, Mr. Carlson said he will be watching for Mr. Gross’ “evolution at Janus.”
“It was a surprising move from a place like Pimco, where he had control of everything to a place like Janus, where he’s just running a fund,” Mr. Carlson added. “Maybe he’s set up on an island in Newport Beach, and he gets to do what he wants.”
Mr. Gross was not available for comment, but according to the Friday statement from Janus, he will be taking over management of the fledgling Janus Unconstrained Bond Fund (JUCTX). Mr. Gross is scheduled to start work at Janus on Monday.
The fund was launched May 27 and has just $13 million under management. The fund is currently being managed by Gibson Smith, a highly-regarded fixed-income manager, according to Mr. Tjornehoj.
“Gibson Smith has done a good job of showing investors that Janus is not just an equity shop,” he said. “They’ve had some good momentum, and this announcement changes that game entirely. It’s a huge opportunity for Bill Gross to help Janus’ bond fund assets go to places they’ve never gone before.”
Tracy Burke, an investment consultant at Conard Siegel Investment Advisors, is not currently investing in Janus funds, but he said the addition of Mr. Gross might actually make him more skeptical of Janus’ bond funds based, based on Mr. Gross’ reputation for using derivatives.
“It will be interesting to see if he carries over to Janus some of the things he’s been doing with the Pimco funds,” Mr. Burke said. “It seems like normally his funds are among the top or among the worst performers. We don’t invest in Janus bond funds now and frankly we probably won’t, out of concerns about exposure to derivatives.”
While Mr. Gross could easily be compared to a veteran quarterback switching football teams late in his career for a last chance at glory, some observers are already considering larger fallout that could include Mr. Gross brining a team from Pimco with him to Janus.
“I don’t see any downside for Janus, because this will give them an opportunity to develop a large fixed-income platform,” said Brad Cougill, chief investment officer at Deerfield Financial Advisors Inc.
“From a long-term track record perspective, the Pimco folks have proven to be a solid team,” he added. “It will be interesting to see how much of that team moves with [Mr. Gross], and how some of this shakes out.”
Along those lines, Mr. Rosenbluth of S&P Capital IQ said investors should wait to see how much of Mr. Gross’ teams end ups joining him at Janus.
“We think the departure of Mr. Gross will cause some investors to move money elsewhere, whether to Janus or other fixed income funds with strong long-term records,” Mr. Rosenbluth wrote in a Friday blog post.
“We would caution those looking to move to Janus that unless more of Mr. Gross’ team at Pimco similarly departs, his resources will be different,” he added.