Bill Gross chose to field two questions out of nearly 200 in his first public comments as part of Janus Capital Group Inc.—and his answers to both emphasized his contention that “small and flexible” is good for an investment management firm.
The Bond King’s new employer is plenty small compared with his former company, Pacific Investment Management Co.
The smaller stature of Denver-based Janus is expected to provide a nimbleness that could give Gross room to make decisions and trade more efficiently as he takes the helm of the Janus Global Unconstrained Bond fund. The fund will be run from a new Janus office at 520 Newport Center Drive, not far from Pimco’s headquarters. Janus hasn’t outlined plans about whether or how it plans to grow its Orange County outfit.
Talk
Gross made his first public appearance as a Janus portfolio manager in an interview with Janus Chief Executive Richard Weil. Investors, members of the media, and others were able to listen in via the Internet or telephone.
The talk came roughly two weeks after Gross left his post as chief investment officer of Pimco—which he cofounded in 1971 in Newport Beach and helped grow to about $2 trillion in assets under management—and landed at Janus, which manages about $178 billion.
Janus said it received more than 175 queries in advance of last week’s broadcast with Gross.
Much of the 35-minute talk, which was streamed live, covered Gross’ views of the economy and markets, as well as the reasons he came to Janus.
“We sort of chose each other,” said Gross, who carried a generally optimistic tone about the future of the firm, while noting a “certain empathy” for investors “who have suffered disruptions to their portfolios” recently.
The assets of Pimco’s flagship Total Return fund, for instance, dropped about $20 billion to $201.6 billion in the past couple of weeks since Gross announced he’s leaving Pimco.
‘Rough Few Weeks’
Gross, meanwhile, has been the subject of intense media speculation since he made the move.
“It’s been a rough few weeks, but it’s going to be a better few months and years going forward,” Gross said. “I chose Janus because the relationship promises to let me manage money in a simple way, more effective way, free from the complications of the executive committees, responsibilities of hiring and paying, and all of the executive jobs and duties that somehow can bog you down.”
That, he said, is Weil’s job at Janus.
Gross spent the last seven minutes addressing the presubmitted questions, with the first one asking about the difference of running a fund of millions of dollars in assets versus that of billions.
“I speak from inexperience,” quipped Gross, who spent the past 40-some years at Pimco and ran Pimco Total Return, which remains the world’s biggest bond fund.
“I would surmise that the biggest difference would be the flexibility in the smaller size,” Gross said. “There’s no doubt that hundreds of billions in the portfolio [could limit] flexibility. … It has its advantages. Let’s not dismiss the advantages that a large portfolio and a large company can bring. But the smaller size, in terms of flexibility in trading, idea generation, and the fact that the Street doesn’t follow your trail—the bread crumbs to the house—I think it’s a big advantage.”
Weil followed with the second question, asking Gross about “the secret sauce” in building investment teams and successful investment processes.
Gross again emphasized the size of the organization and efficiency of being nimble.
“It’s sort of connected to the last question,” he said. “I think an effective investment organization has to be relatively compact, relatively small.”
He said large committees and the need for votes from many involved parties “[tend] to produce a mush in the middle, a consensual type of portfolio that really doesn’t do much. So I think that’s important from an organizational standpoint to stay small. I tried to stay small at Pimco … the markets and success sort of led it to larger size. But it is important to keep that compact to keep that effective.”
Gross also pointed to having employees who are passionate about the markets and their firms, and are committed to serving their clients.
Gross took his first investment outlook letter to clients, published last week, to express appreciation for the “trust of the millions of clients and thousands of employees over decades.” He said he would have “stayed [at Pimco] to my last breath” had there been “a reasonable way to continue there.”
Neither Janus nor Pimco was available for comment for this article.
