The biggest story in the multi-trillion-dollar fixed income market last year was the departure of former “bond king” Bill Gross from PIMCO, the firm he co-founded in 1971.
Mr. Gross managed PIMCO’s flagship Total Return Fund (PTTAX), which had more than $225 billion in assets under management at its peak. When he left PIMCO for the smaller Janus Capital, he took up management of what is now the Janus Global Unconstrained Bond Fund (JUCAX), which had less than $15 million in total assets at the time.
Expansion of Global Macro Fixed Income Team
Now Janus is expanding its footprint in unconstrained fixed income, with the acquisition of Kapstream Capital, a global unconstrained fixed income manager. Kapstream, which had $6.6 billion in assets under management (AUM) as of March 31, sold 51% of itself to Janus for approximately $85 million in upfront cash consideration and gave Janus the option to buy the remaining 49% in the future. Kapstream’s assets will be managed as part of the current Global Macro Fixed Income team led by Bill Gross, thus bringing that team’s AUM to $8.7 billion, as of the March 31 figures.
“This transaction underscores three key commitments at Janus,” said Janus CEO Dick Weil, in a recent statement. “Kapstream has a rapidly growing business in one of the world’s best asset management markets. In addition, this transaction will reinforce our efforts to build a global macro fixed income team offering best-in-class global unconstrained bond strategies.”
Mr. Gross will remain the primary portfolio manager of the Janus Global Unconstrained Bond strategy, but he’ll also be joined by Kapstream’s Kumar Palghat as co-portfolio manager. Nick Maroutsos, who co-founded Kapstream with Mr. Palghat in 2006, is also joining the Janus team. Mr. Gross and Mr. Palghat worked together at PIMCO for years, along with Mr. Weil.
“We are delighted to offer our clients the highest level of macro fixed income investment expertise with Bill Gross, Kumar Palghat and the highly sophisticated professionals that make up the Kapstream team,” said Mr. Weil.
Kapstream’s Australian business will continue “essentially in its current form,” according to the statement.
Gross’s Performance at Janus
Mr. Gross took over the Janus Global Unconstrained Bond Fund on October 6, 2014. From that date through the end of July 2015, the fund’s A-class shares have returned 0.70%, besting Morningstar’s Nontraditional Bond category by 1.09%, but falling short of the Barclays U.S. Aggregate Bond Index’s gains of 2.02%, according to data from Morningstar.
Mr. Gross said he is “looking forward” to working with his “old colleague” Mr. Palghat, and Mr. Palghat said “the opportunity to work with Bill again and create a truly global team” was not one he could pass up. In June, investors pulled $39.1 million from the fund, underscoring the importance of the acquisition.