Janus Shares Soar Most in 14 Years After Gross Joins FirmLaura Marcinek and Charles Stein
Janus Capital Group Inc. Chief Executive Officer Dick Weil has faced 17 straight quarters of client withdrawals since his arrival. Now he’s turning to former Pacific Investment Management Co. colleague William Gross to revive the firm’s fortunes.
Gross, who co-founded Pimco and was previously chief investment officer at the world’s biggest bond fund, will help build Janus’s fixed-income business as its equity funds lag behind competitors and the market. Janus shares surged 43 percent, or the most in 14 years, after announcing Gross’s hiring.
“This is a shot in the arm for the growth prospects of Janus,” Michael Kim, an analyst with Sandler O’Neill & Partners in New York, said in a telephone interview.
Janus, with $178 billion in assets under management, has struggled since the bursting of the Internet bubble after rapid growth in the 1990s. The firm was one of the first mutual-fund companies identified by former New York Attorney General Eliot Spitzer in September 2003 as permitting improper trading and agreed to pay $226 million in penalties and management fee cuts to settle regulators’ complaints.
More recently, Janus has struggled with underperformance and employee defections.
Three high-level fund managers left last year and at least 15 executives and managers departed under Weil’s CEO predecessor Gary Black. The $7.8 billion Janus Fund trailed 85 percent of peers over the past five years, according to data compiled by Bloomberg. The $4.1 billion Janus Overseas Fund trailed 99 percent while the $9.4 billion Janus Twenty Fund lagged behind 96 percent of similar funds.
“Janus has over the past several years really been struggling on the domestic equities side,” Bridget Hughes, an associate director in manager research at Morningstar Inc. in Chicago, said in a phone interview. “The money I don’t imagine is going back into the equity funds until they can stabilize their performance.”
Janus opened a global bond fund managed by Gibson Smith and Darrell Watters in 2010 when 90 percent of the firm’s assets were in equities. Its expanded fixed-income assets to 18 percent as of June 30. The $7.1 billion Janus Flexible Bond Fund has returned 3.8 percent this year, trailing 51 percent of rivals, according to data compiled by Bloomberg.
Hiring Gross gives Janus a household name that could help the firm expand fixed-income to $65 billion to $70 billion versus $31 billion as of June 30, Credit Suisse Group AG said in a research report.
“It will be a turning point for flows,” Hughes said. “With this addition of Bill Gross on the unconstratined bond fund and then, likely, more strategies to come, I think the fixed income side will continue to grow.”
Before joining Janus, Weil worked for Gross at Pimco from 1996 to 2010. He served as a managing director, chief operating officer, general counsel and founded the firm’s German operations.
“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,” Gross said today in a statement from Denver-based Janus. He will be based in a new Janus office in Newport Beach, California.
Janus rose to $15.89 in New York trading, the highest since October 2008.