(Bloomberg) -- Janus Capital Group saw more than $1 billion of estimated net deposits into two bond mutual funds in October after hiring star bond manager Bill Gross.
The Janus Global Unconstrained Bond Fund, which Gross started managing last month, drew an estimated $364 million in client deposits in its first full month with the bond legend at the helm, bringing assets to $442.9 million through Oct. 31, according to data compiled by Bloomberg. Janus Flexible Bond Fund, a core bond strategy, saw $821 million of deposits in the month, pushing assets to $8.4 billion.
“We are encouraged by the level of interest we are seeing across many of our funds, including our Flexible Bond Fund and Global Unconstrained Bond Fund,” the Denver-based company said in an e-mailed statement. “Management believes we will continue to have unusual levels of opportunities, particularly in institutional fixed income, over the next year or more.”
Janus is seeking to raise its profile and rebuild a brand damaged by missteps and departures of money managers. In addition to hiring Gross, the firm recently agreed to buy VelocityShares to expand in exchange-traded products, the fastest-growing part of the fund industry. The firm said it had about $1.1 billion in U.S. mutual fund deposits last month, the first time in more than three years that clients on balance added money.
BETTING ON GROSS
Janus, known for its concentration in technology stocks that led to a rapid rise and fall when the sector boomed then crashed in the early 2000s, is diversifying away from domestic equities as it seeks to stanch investor withdrawals. Assets peaked at $325 billion in the first quarter of 2000, before shrinking by 59 percent over the next three years.
Janus had $174 billion under management as of Sept. 30.
The firm was one of the first mutual-fund companies identified by former New York Attorney General Eliot Spitzer in September 2003 as permitting improper trading and agreed to pay $226 million in penalties and management fee cuts to settle complaints. More recently, Janus suffered from underperformance and employee defections.
The firm is betting the addition of the 70-year-old Gross, who built Pimco into an asset manager with almost $2 trillion, will help attract money. Gross, manager of the world’s biggest bond fund until he unexpectedly left Pimco on Sept. 26, is running the Unconstrained Fund out of a rented office a five- minute walk from Pimco’s headquarters in Newport Beach, California.
MARKET EXPECTATIONS
The Janus Unconstrained fund had inflows of $66.4 million in September, according to research firm Morningstar, and Janus put $100 million of seed money into the unconstrained strategy in the third quarter, according to a filing last month.
The market anticipated $25 billion to $50 billion in new assets, which may be “setting up for possible disappointment,” Citigroup analyst William Katz said last month.
Janus shares fell 0.9 percent to $15.18 in New York. The shares, which jumped a record 43% on the day Gross announced his decision, have climbed 23% this year, compared with 6.1% for the 18-company Standard & Poor’s Index of asset managers and custody banks.
Gross’s move changed the fixed-income landscape, and the money set in motion won’t settle immediately, according to Janus Chief Executive Officer Dick Weil.
RECORD REDEMPTIONS
“It’s important to note that not everybody is going to make a decision on the first day,” Weil said on an Oct. 23 earnings conference call with investors and analysts. It may be “a one-year-plus kind of transitional period rather than anything that is immediate,” he said.
Pimco’s main fund had record redemptions of $27.5 billion in October, after $23.5 billion in withdrawals in September. That’s brought assets to $170.9 billion, down 42% from a peak in April 2013.
Janus also saw deposits into its Global Life Sciences and Contrarian funds last month, with each pulling in more than $100 million, according to data compiled by Bloomberg.
Bloomberg estimated net deposits based on month-end assets for the funds and accounting for performance-related gains or losses. The estimates may differ from actual flows. Janus doesn’t provide detailed figures on monthly deposits.
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