Gross' Departure Has Little Effect on Our View of Janus
With Bill Gross' fund performance faltering again in 2018, we weren't surprised by the announcement and are leaving our fair value estimate in place.
We were not too surprised to see narrow-moat rated Janus Henderson (JHG) announce the retirement of Bill Gross, who CEO Dick Weil brought on board at Janus Capital Group back in September 2014, given that his impact on the firm has been fairly limited (running less than $1 billion of Janus Henderson's $75 billion in fixed-income AUM), and his departure is unlikely to cause much of a stir (other than the outflows created when he pulls his own money out of the funds he was running). We are leaving our USD 26 per share fair value estimate in place.
While Gross' hiring was seen as a bit of a coup for Janus, with the potential existing for the firm to pick up a significant amount of fixed-income AUM, we did note at the time that there were some hurdles that would limit the amount of assets Janus could pick up. For starters, Janus was (and still is) a much smaller player in the bond fund market, with just $31.4 billion in fixed-income AUM at the end of the June 2014. At PIMCO, which had nearly $2 trillion of AUM (most in fixed-income portfolios), Gross had an army of traders, research analysts, portfolio managers, and other specialists at his disposal. While we expected additional resources to be committed to Gross' efforts at Janus, we didn't see it being large enough to support a large influx of capital, especially with the firm competing against the heaviest hitters in the institutional fixed-income market--BlackRock, PIMCO, and Legg Mason. We've also been critical of Gross' performance (or lack thereof) over the years, and the fact that his hiring created two competing power centers for Janus' home-grown fixed-income business (which had been built from scratch by Gibson Smith, who ultimately left the firm in early 2016). Having recently noted that Gross' fund performance had faltered again during 2018, raising questions about how long he might remain with the firm, we were not too surprised by the announcement on Feb. 4.
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Greggory Warren, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.