Janus Capital Group Inc.\’s share price is still up a lot more than 50% since the arrival of Bill Gross in September 2014, but the former Pimco bond guru\’s flagship portfolio isn\’t doing as well.
The Global Unconstrained Bond Fund has produced negative returns and disappointing sales so far in 2015, somewhere between US$50 million and US$60 million, estimates J.P. Morgan, which also noted the modest redemptions in February.
Analyst Kenneth Worthington said Janus’ fundamentals are improving as hoped – its core money is doing better and its fixed-income franchise is selling well – but the elevated expectations for Mr. Gross are not panning out so far.
\”We see risk to Janus shares from further underperformance of Janus\’ Unconstrained Bond Fund, damaging what we see like a fragile reputation for Bill Gross,\” the analyst told clients.
The firm is generating its best net sales figures since 2007, going back to positive sales, with no meaningful contribution from Mr. Gross. As a result, Mr. Worthington anticipates increased earnings upside due to both improvements in the core business so that as new product launches succeed.
He continues to like the prospects for Janus\’ stock because the core business strengthens, but he cut his price target to US$19.50 from US$20 due to the \”increasing perception risk regarding Gross asset gathering.\”
If Mr. Gross ends up being successful, of course, there is further upside possibility of the stock.