For the first time in more than 40 years, Bill Gross is not beginning a new week working for Pacific Investment Management (Pimco), the company he co-founded. Instead, the bond fund king will start a new chapter of his storied career at Janus Capital Group (JNS).
Known for managing the biggest bond fund in the world, Pimco Total Return (PTTRX), Gross leaves behind a Pimco weakened by heavy fund outflows and a cloud of uncertainty that began with management differences with and subsequent departure of CEO Mohamed El-Erian.
In a Janus Capital statement released Friday, Gross said, “I chose Janus as my next home because of my long standing relationship with and respect for CEO Dick Weil and my desire to get back to spending the bulk of my day managing client assets.”
As PIMCO continues to bleed assets and Janus Capital Group attracts new capital (JNS stock jumped more than 40% on the Bill Gross news before retreating a few percent today), the question that follows is this:
Will the “Bond King” retain his crown at Janus Capital?
Here are some ideas and clues about what investors can expect from Bill Gross when he starts managing his new Janus fund on Oct. 6.
Enter Bill Gross, Manager of Janus Global Unconstrained Bond (JUCAX)
It seems Bill Gross spent the bulk of his time in the final few years of his tenure at Pimco as a figurehead, traveling the world to speak at industry events and economic summits, rather than managing client assets.
As things turned sour — climaxing with the El-Erian exit — the public relations work increased, which had the opposite effect that was desired: Gross appeared more defiant and disconnected, and less the calm and confident bond guru he had once been (and perhaps still is today).
So how might Bill Gross return to his glory days as manager of the new Janus Global Unconstrained Bond Fund (JUCAX)?
One Bill Gross quote in Friday’s Janus Capital announcement resonates particularly loud and clear to me:
“I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization.”
There is no doubt that a money manager can be his or her best with less assets. As I noted in my recent story, Don’t Ignore Mutual Fund Asset Bloat, gigantic asset size tends to be a drag on performance.
Per the small-size advantage, recent assets under management for JUCAX was $12.9 million, compared to $221.6 billion for Pimco Total Return. According to Janus detail on the fund, JUCAX will have an absolute return strategy, which is identical in style to the Gross’ Total Return fund.
A timing advantage for Bill Gross to step in and work his magic is that the newness of the Janus Global Unconstrained Bond Fund (inception date is May 27, 2014), allows him to build a fund from the ground up. As of June 30, the JUCAX portfolio still was 67% cash, and now that Gross is on board, more cash is sure to flow in. This will allow for a fresh new platform from which to jump out of the gates.
With that said, of course, only time will tell if Bill Gross can return to glory. My guess is that Gross will be more determined than ever to wipe clean the negative remnants of Pimco and build another fund that reflects more of the old Bill than the recent one.
In summary, the “unconstrained” moniker is an apt one and should prove to be fertile ground for the investment style and fixed income strategy fit for a return of a bond king.
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As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.
