After Bill Gross abruptly quit Pacific Investment
Management Co., the bond-fund giant he co-founded, in September to join a much
smaller rival, the big question was how much money would follow him. His new
firm, Janus Capital Group Inc., subsequently disclosed that investors
poured about $1.1 billion into Mr. Gross’s new fund in October and November.
That money was critical, because it helped push the Janus Global Unconstrained
Bond fund past $1 billion in assets under management, a key threshold for large
investors, according to industry experts.
But what Janus didn’t tell investors was that, in a
previously unreported development, a majority of the money came from a single
Southern California brokerage office—the same office where one of Mr. Gross’s
personal financial advisers works, according to industry executives who have
viewed confidential brokerage data.
The Morgan Stanley wealth-management office in La
Jolla, Calif., routed more than $700 million to Mr. Gross’s Janus fund in
October and November. The transfers accounted for more than 60% of the money
raised by Mr. Gross in the first few months after he left Pimco.
It isn’t clear whether the money originated from one
investor or one financial adviser, or from more than one, although Mr. Gross
acknowledges at least some of the money came from him. While it isn’t unusual
for a manager to invest in his own fund, industry executives say it is
extremely rare for one firm or office to account for such a large percentage of
a prominent fund’s incoming cash.
Mr. Gross, 70 years old, is a billionaire who earned more
than $200 million a year before he left Pimco, the giant money manager he
helped start four decades ago and then abruptly left in September. His
departure shocked the investment community and triggered a scrum for tens of
billions of dollars, as rivals tried to poach Pimco’s clients. Investors pulled
$150 billion from Pimco last year, most of it in the months after Mr. Gross’s
departure.
Investors in Janus shares have bet his arrival would help
the beleaguered money manager—which has suffered from years of outflows due to
poor performance—attract investors. Janus’s stock jumped 43% on Sept. 26, 2014,
the day Mr. Gross’s hire was announced, the biggest one-day gain in the
company’s history. Janus shares have pulled back since then but are still up
11% since he took over the fund in early October, and the firm saw more inflows
in October across all of its mutual funds than it has in any single month since
2007, according to data tracker Morningstar Inc.
In October, according to the Albridge data viewed by
industry executives, more than $300 million of total investor inflows into Mr.
Gross’s Janus fund came from the Morgan Stanley office in La Jolla. According
to Morningstar, the fund saw a total of about $360 million of inflows that
month, meaning 87% of all new money that came into the fund in Mr. Gross’s
first full month on the job originated from that office. In November, the
office contributed about $400 million out of $770 million in total inflows, according
to the people who viewed the Albridge data and Morningstar.
When Mr. Gross took over the fund at Janus in early October,
it had just $12 million in assets under management following its launch in May
2014, according to Morningstar. The firm was expected to report new asset
totals for December on Wednesday. The fund follows a different strategy than
Mr. Gross adhered to while running the Total Return fund at Pimco, allowing him
to invest in a variety of bonds and other securities. The fund has lost 1.1%
since Mr. Gross took over Oct. 6 through Tuesday, ranking it in the 52nd
percentile in its category, according to Morningstar.
Janus rivals such as Vanguard Group and BlackRock Inc.
appear to have taken a much bigger share of the outflows from Pimco’s mutual
funds, which totaled about $150 billion in 2014, according to Morningstar’s
most recent data. Vanguard, for example, saw $10.3 billion flow into its Total
Bond Market Index fund in October, the fund’s highest monthly inflow on record.
Mr. Gross got a boost in November when George Soros’s
Soros Fund Management made a $500 million investment, although that amount is
run through a separate account at Janus that isn’t part of Mr. Gross’s mutual
fund.
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