By Maureen Farrell And Matt Wirz
Bill Gross's new home is a firm with a topsy-turvy past and
great hopes for the future.
Janus Capital Group Inc., the fund-management company that
landed Mr. Gross after his acrimonious departure from Pacific
Investment Management Co. on Friday, has experienced both the highs
and the lows of the market in its 45-year history.
Traditionally focused on stock investing, Janus saw its business
soar during the Internet bubble, only to stumble in its aftermath.
A few years later, Janus became embroiled in a probe into trading
in mutual funds. Since then, the firm has broadened its horizons to
include assets other than stocks--a strategy Mr. Gross, arguably
the most successful bond investor of his generation, will be
expected to further.
At Janus, Mr. Gross will work for Richard Weil, a 15-year
veteran of Pimco, who joined Janus in 2010 as chief executive. But
Mr. Gross and Mr. Weil won't work in close proximity. The former
won't move to Janus's headquarters in Denver and instead will work
out of a new office in Newport Beach, Calif., where Pimco is
based.
On Friday, Janus was already feeling a positive effect from Mr.
Gross's hire: Its shares soared 43%, its biggest one-day jump ever.
Before Friday's bump, Janus's shares were down 29% during Mr.
Weil's tenure, with the firm suffering net outflows every
quarter.
Founded by Wall Street financier Thomas Bailey in Denver in
1969, Janus came under the control of Kansas City Southern, a
railroad company, in 1984, when the rail firm bought an 82% stake
in Janus for $24 million. With just $400 million under management
at the time, the fund grew to hold $330 billion at its peak in
2000, fueled by the Internet stock craze. Several months after the
Nasdaq Composite Index peaked that year, Kansas City Southern spun
off Janus, along with several other of its financial-services
firms, into a firm that would later become Janus Capital Group.
As the Internet bubble burst, shares of the company tumbled, and
its assets under management dropped by more than half in the next
several years.
By late 2003, the firm had become caught up in a major
mutual-fund scandal. Then-New York Attorney General Eliot Spitzer
investigated it for allegedly allowing some of its investors to
make rapid trades ahead of others. The fund settled with state and
local regulators in early 2004, neither admitting nor denying
wrongdoing, and repaid some investors for trading-related
losses.
Since Mr. Weil joined, he has made a big push to diversify the
fund outside of its historical concentration on equities, tripling
the fund's fixed-income assets to $31 billion, from $10.3
billion.
Beyond Mr. Gross, Janus added another high-profile name in July,
when it named Myron Scholes, who won the Nobel Prize in economics
for co-developing the Black-Scholes model for pricing options, as
its chief investment strategist.
Morningstar analyst Vincent Lui said it is possible that
"hundreds of billions" in assets under management at Pimco, a unit
of Allianz SE, could follow co-founder Mr. Gross to his new post at
Janus.
One open question is how Mr. Gross, known for his autocratic
management style, will mesh with the more collaborative approach of
Janus's core fixed-income team, led by fund manager Gibson Smith,
says Morningstar fixed-income analyst Sumit Desai. "It's a
team-based approach at Janus, and different analysts there have
pretty high influence," Mr. Desai said. "It will be interesting to
see how that culture jibes with the culture of Bill Gross."
Mr. Gross's investment will be "separate and complementary" to
Mr. Smith's operations, a Janus spokesman said.
One former employee said Janus struggled to make the cultural
transition to managing more than just stocks. Fixed-income managers
there struggled to expand their funds, according to Sandy
Rufenacht, a former bond-fund manager at Janus.
Yet Mr. Rufenacht, who now runs his own Denver-based investment
firm, Three Peaks Capital Management, says, "Someone like Bill
Gross changes the identity of the firm overnight."
Mr. Miller said he views Mr. Weil as a hands-off manager who
gives his employees a wide berth to broaden their own businesses,
which should help him manage Mr. Gross.
Mr. Miller heard Mr Weil articulate where he wants Janus to be
by 2020 when he joined the firm. Among his goals at the time: Get
the bonds under management to hit $50 billion.
"I think that goal will probably change now," said Mr. Miller
with a chuckle.
Sarah Krouse and Steven Russolillo contributed to this
article.
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