Most money in Bill Gross’ new Janus fund came from Gross himself
High-profile bond manager Bill Gross put more than $700 million of his own money into a fund he manages at Janus Capital Group Inc., the firm’s chief executive has acknowledged.
Thursday’s disclosure marked another turn in a tumultuous, and in many ways humbling, year for Gross, who in September abruptly left Newport Beach-based Pacific Investment Management Co., the firm he co-founded and built into the world’s largest fixed-income money manager. He was reportedly forced out after a series of clashes with senior executives over the way he managed Pimco’s massive Total Return Fund, which under performed for years. This month he told Bloomberg News he had in fact been fired after he had offered to scale back his role.
Gross’ arrival at Janus was accompanied by great fanfare from the Denver company, and analysts wondered how much of the massive outflows from Pimco, which spiked after Gross’ exit, would follow him. In November, Gross himself announced on Twitter that a family fund controlled by legendary financier George Soros had invested $500 million with him in a separate account at Janus. Then in December, mutual-fund research firm Morningstar Inc. reported that Gross’ new fund, the Janus Unconstrained Bond Fund, had its assets soar from just $12 million before Gross arrived to more than $1.2 billion.
As it turns out, most of the new money in the fund came from Gross himself. In January, the Wall Street Journal reported that since Gross’ arrival, most of the inflow in the Global Unconstrained Bond Fund were from the office of Gross’ personal financial advisor in La Jolla. Gross acknowledged on Twitter that some of the new money was his own.
In a conference call Thursday to discuss the firm’s fourth-quarter earnings, Janus Chief Executive Richard M. Weil said Gross’ investment in Janus’ Global Unconstrained Bond Fund — representing the bulk of the inflows into the fund — was a sign that Gross had confidence in his own strategy.
“He fundamentally believes that investing alongside of clients aligns interests,” Weil said. “He believes in eating his own cooking....”
The fund had $1.37 billion under management as of the end of the year, according to Morningstar.
The news of Gross’ investment came as Janus reported fourth-quarter earnings. The company said net income was $46.7 million, or 24 cents per share, compared with $38.3 million, or 21 cents per share, a year earlier.
For the first time since the second quarter of 2009, Janus reported positive net inflows overall, which totaled $2 billion in the quarter, including the Gross investment.
Analysts said the fact that Gross made the large investment was a double-edged sword.
Jeff Tjornehoj, a senior research analyst at Thomson Reuters’ Lipper mutual-fund research firm, said along with aligning Gross’ interest with other investors, the additional funds were likely needed to allow Gross to make complex trades that often require large amounts of capital.
“His last job involved shepherding hundreds of billions of dollars,” he said. “This is sort of like taking an NFL coach and expecting him to perform coaching a Pee Wee team.”
On the other hand, analysts said, Gross’ sizable personal investment pointed up the relatively small amount of outside money that so far has followed him to his Janus fund.
“It’s surprising we haven’t seen more money move to the fund,” said Michael Herbst, Morningstar’s director of manager research. “If you think back to the days around Gross’ departure, the fear was that all the money was going to leave Pimco and go with Gross, and that hasn’t transpired.”
A Janus spokeswoman declined to comment on the investment beyond Weil’s remarks.
Starkman reported from New York and Khouri from Los Angeles.
