Janus's Weil Says Rule Proposal Could Impact Gross's Bond Fund

  • Gross's fund could see `change in investment behavior'
  • Janus fund wrote derivatives on $1.7 billion of bonds in 2015

Bill Gross’s bond fund at Janus Capital Group Inc. could be impacted by proposed limits on the use of leverage by mutual funds, according to the head of the Denver-based money management firm.

Gross’s fund “could potentially see some change in investment behavior depending on how those final rules and regulations turn out,” Richard Weil, Janus’s chief executive officer, said today on a conference call. “We’ll keep an eye on it, but it’s not a huge focus for us at this moment.”

Some mutual funds would have to curb their use of derivatives or build larger cash buffers under rules proposed by the U.S. Securities and Exchange Commission last month. The SEC is giving the public 90 days to comment on the plan, which represents the agency’s first attempt to write a comprehensive set of rules governing the use of derivatives by mutual and exchange-traded funds.

Gross employs derivatives such as options and credit default swaps to generate income for Janus Global Unconstrained, though he pared the amount of risk he was taking during the fourth quarter. At the end of June, Janus Global Unconstrained had entered into credit default swaps in which it agreed to insure bonds with a face value of almost $1.7 billion, a figure that exceeded the fund’s $1.46 billion of net assets at the time.

The fund declined 0.6 percent in the past year, beating 80 percent of similar funds, according to data compiled by Bloomberg.

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