Star bond-fund manager Bill Gross will share some of the
limelight at the helm of his Janus Capital Group Inc. mutual fund
as part of a move aimed at bolstering the firm's bond team.
Denver-based Janus is spending at least $85 million to buy a
majority interest in Kapstream Capital Pty Ltd., an Australian-U.S.
global bond firm that managed $6.6 billion as of March 31, the firm
said.
As part of the deal, Kumar Palghat, a Kapstream founder and
former Pimco executive, will join Mr. Gross's Janus Global
Unconstrained Bond fund as co-manager of the fund. Both Mr. Gross
and Mr. Palghat will report to Janus Chief Executive Officer Dick
Weil.
Mr. Gross has suffered from rocky performance and lackluster
inflows into his fund since taking over in late September,
following his abrupt departure from Pacific Investment Management
Co.
Since he began trading on Oct. 6, the fund has lost 0.8% through
June 29, compared with a gain of 0.18% for its benchmark, the ICE
Libor 3 month USD, according to fund-research firm Morningstar Inc.
Mr. Gross's fund is lagging behind 65% of its peers.
So far this year, the Janus Global Unconstrained Bond fund is
down 0.312% compared with a gain of 0.13% for the benchmark,
lagging behind 80% of peers, Morningstar says.
Mr. Gross's fund has seen about $119 million in net inflows this
year through June, according to Morningstar, a fraction of the tens
of billions of dollars that have left Pimco since his
departure.
"I look forward to working with my old colleague Kumar Palghat
and the rest of the Kapstream team as we deliver value for our
clients," Mr. Gross said in a news release.
Janus had signaled that it would build out Mr. Gross's team,
which he has managed from an office in Newport Beach, Calif., and
typically pairs portfolio managers together at its funds.
The Kapstream deal will increase the amount of fixed-income
assets that Janus, known for its stock funds, oversees. Janus will
manage $8.7 billion of global macro fixed-income assets, as of
March 31, including $1.5 billion in Mr. Gross's Janus Global
Unconstrained Bond fund. Janus has about $190 billion of total
assets under management.
Janus will make an upfront payment of about $85 million for 51%
of the firm; it can purchase the remaining 49% in the future,
according to terms of the transaction, Janus said.
"The acquisition of Kapstream furthers our commitment to expand
our fixed-income capabilities," Mr. Weil said in a statement.
Kapstream was founded in 2006 to focus on "unconstrained" bond
investing, or buying and shorting bonds in any market, the strategy
of Mr. Gross's new fund.
Mr. Palghat spent a decade at Pimco working for Mr. Gross. A
former World Bank executive, Mr. Palghat was a midlevel portfolio
manager in Pimco's global investing team noted for an easygoing
personality that stood out on Pimco's charged trading floor,
according to someone who worked with him at Pimco.
Along with his work with Mr. Gross, Mr. Palghat will remain
portfolio manager of the Kapstream Absolute Return Income Fund,
which is only available to Australian investors.
"The opportunity to work with Bill again and create a truly
global team was not one we could pass up," Mr. Palghat said in the
release.
Kapstream's other founders, Steve Goldman, a former marketing
executive, and Nick Maroutsos, a former trade assistant in Pimco's
Australia office, will join Janus and help manage fixed-income
investments.
Write to Gregory Zuckerman at gregory.zuckerman@wsj.com and
Kirsten Grind at kirsten.grind@wsj.com
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