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What Gross Hire Could Mean for Janus

Janus' asset growth could be significant—and does raise our fair value estimate for the firm—but it also faces some hurdles.

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We have increased our fair value estimate for narrow-moat-rated  Janus Capital Group (JNS) to $15 per share. We adjusted our valuation model to account for the impact we expect Bill Gross' hiring to have on the firm's ability to attract and retain assets, especially on the fixed-income side of things. The potential exists for Janus to pick up a significant amount of fixed-income AUM in the near to medium term, given Gross' reputation as a bond fund manager, and the likelihood that PIMCO will see a meaningful amount of outflows tied to his departure. However, we would note that there are a few hurdles that could limit the amount of assets the firm ultimately picks up.

For starters, Janus is a much smaller player in the bond fund market, with just $31.4 billion in fixed-income AUM at the end of the second quarter. At PIMCO, Gross had an army of traders, research analysts, portfolio managers, and other specialists at his disposal. While additional resources will be committed to Gross' efforts at Janus, it may not be adequate to support a large influx of capital in the near to medium term. It should also be noted that Janus will be competing against some of the heaviest hitters in the fixed-income market when going after institutional business, with  BlackRock (BLK) , PIMCO, and  Legg Mason (LM) all having significantly more resources to bring to bear.

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Greggory Warren does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.