Janus Capital Group Inc. posted an 18% jump in profits in the fourth quarter after hiring star bond fund manager Bill Gross in September.
The Denver asset management firm posted its first quarter of net deposits since 2009.
Janus beats estimates
While unveiling its fourth-quarter results today, Janus Capital Group reported its net income jumped to $45.2 million, or 24 cents a share, from $38.3 million, or 21 cents, a year earlier. Its earnings beat the 21-cent average per-share estimate of 12 analysts surveyed by Bloomberg.
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The Denver-based firm said that it ended the fourth quarter with $183.1 billion in total assets under management, compared with $174.4 billion in the prior quarter and $173.9 billion a year earlier. Its total revenue rose 13% to $254.8 million, driven by higher investment management fees.
Janus’ CEO Richard M. Weil has raised the firm’s profile in the past year, hiring Pacific Investment Management Co. co-founder Bill Gross and agreeing to buy an exchange-traded product provider. Weil had struggled to stem client defections even as he expanded the fixed-income team and created a multi-asset investing group.
Gross entry strengthens Janus
Bill Gross stunned executives at Newport Beach, California-based Pimco and its parent Allianz SE with his departure announcement last year. He has been credited for building one of the industry’s best long-term records while running the $143.4 billion Pimco Total Return Fund and expanded Pimco to oversee about $2 trillion.
He started overseeing the Janus Global Unconstrained Bond Fund on October 6. Gross’ new bond fund at Janus had net inflows of $176 million in December, after raising $1.1 billion in October and November. The inflow facilitated the Janus bond fund to move well past $1 billion in asset under management, a key threshold for large investors.
Earlier this month, the Wall Street Journal reported that Bill Gross may have invested as much as $700 million of his own money into his new Janus Global Unconstrained Bond Fund.
Following today’s results announcement by Janus, Jason Weyeneth and Samuel Ross at Sterne Agee in their research report point out that Janus’ fourth-quarter EPS upside was driven by performance fees. They highlight that the asset manager’s upside reflected significantly enhanced performance fees (+$0.04), well controlled expenses including a comp ratio below prior guidance (+$0.01), partially offset by investment losses (-$0.01).
The Sterne Agee analysts note Janus’ performance fees are close to break-even, though not sustainable. They note the asset manager reported a performance fee headwind of just -$0.8 million, which is considerably better than the -$11.5 million the analysts had modeled earlier and consensus of -$9.6 million.
The analysts also point out that Janus’ equity fund performance showed improvement with 81% in the top half of their Morningstar groups on a 3-year basis. However, the analysts note Janus’ fixed income performance deteriorated – stating”
Fixed income performance however deteriorated, with 100% in the top half on a 1-year and 3-year basis at 9/30 falling to just 2% and 85% as of 12/31.
The Sterne Agee analysts assigned a “Neutral” rating to the firm and pegged the price target for Janus at $18.