Janus Capital Group Inc (NYSE:JNS) has scored a big win by pulling Bill Gross away from Allianz SE (ETR:ALV)-owned Pimco. The so-called “Bond King” and Janus issued statements this morning announcing that he was joining Janus.
Bill Gross is one of a kind
The Wall Street Journal quotes one trader as saying, “Gross can’t be replaced. He is Pimco.”
Todd Rosenbluth, director of mutual fund research at S&P Capital IQ, offered a similar sentiment. “Pimco and Bill Gross are synonymous,” he told Reuters this morning. “It will be extremely hard to think of Pimco and Bill Gross as separate, and it will take time for investors to realize that he no longer is going to play a role at one of the world’s largest fixed income managers.”
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Today’s stock price movement in Janus Capital Group and Allianz clearly demonstrates that these views are widely held on Wall Street. As Allianz stock fell, Germany’s DAX index slumped along with it, dragged down by the firm’s hefty size.
Meanwhile, Janus Capital Group stock skyrocketed, hitting the highest level it has been at it more than four years.
U.S. bond market also hit
The stocks of both companies aren’t the only things moving on news of Gross’ move from Pimco to Janus. It apparently triggered a selloff in U.S. Treasury bonds as well. The “Bond King” managed the biggest bond fund in the world. Pimco has 41% in holdings related to the U.S. government and Treasury bonds.
Tom di Galoma of ED&F Man Capital Markets said investors are now questioning what will happen to the massive amount of Treasury bonds held by Pimco’s Total Return Fund. The flagship fund has sustained its 16th consecutive month of outflows in August, and its performance fell behind 73% of peer funds, thus demonstrating that it was already in trouble—even before Gross’ departure was announced.
FactSet reports that yields on the U.S. 10-year notes edged upward a bit to 2.52% this morning.
Bill Gross’ departure not much of a surprise for some
Although investors clearly saw Bill Gross’ departure as a big surprise, Reuters reports that there has been trouble at Pimco for a while and that Gross has been threatening to leave for some time. The media outlet cited “a source familiar with the matter” who said that Gross had been fighting with Pimco’s executive committee.
In Janus’ press release, the firm said Gross will manage the new Janus Global Unconstrained Bond Fund and other strategies related to that. Overall, he will focus on global asset allocation. He starts work at Janus Capital on Sept. 29. Pimco said it has a succession plan in place already and that management would soon announced the name of the next chief investment officer.
The news of Gross’ leaving comes just days after it was reported that U.S. regulators were looking into Bill Gross and his involvement in one of Pimco’s exchange-traded funds. They’re trying to determine whether the fund artificially inflated its returns.