Oct. 23 (Bloomberg) — Janus Capital Group Inc., the firm that hired bond legend Bill Gross last month, said profit rose 25 percent in the third quarter as assets rose from a year earlier, boosting fees for managing money.
Net income at Janus increased 25 percent to $40.9 million, or 22 cents a share, from $32.6 million, or 17 cents a share, a year earlier, the Denver-based firm said today in a statement. Earnings matched the 22-cent average estimate of five analysts surveyed by Bloomberg.
Chief Executive Officer Richard M. Weil has raised the firm's profile in the past month, hiring Pacific Investment Management Co. co-founder Gross and agreeing to buy VelocityShares LLC to expand in exchange-traded products. Customers pulled a net $2.4 billion from Janus's equity funds in the quarter, while putting in $300 million into the firm's fixed-income products. Since taking over in 2010, Weil has struggled to stem defections even as he expanded Janus's fixed- income team and created a multi-asset investing group.
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"Bill's decision to join Janus is reshaping the fixed income landscape across the industry," Weil and Chief Financial Officer Jennifer McPeek said in the company's earnings presentation. Gross's fund "stands to benefit substantially over time across distribution channels and geographies," and other franchises including asset allocation are also benefiting, according to the presentation.
Surprise Departure
Janus shares, which surged a record 43 percent the day the firm announced Gross was joining, have climbed 15 percent this year, compared with a 3.7 percent decline in the 18-company Standard & Poor's Index of asset managers and custody banks.
The 70-year-old Gross started managing the Janus Global Unconstrained Bond Fund this month after surprising executives at Newport Beach, California-based Pimco and its parent Allianz SE with his departure on Sept. 26. He previously managed the world's biggest bond mutual fund, the $201.6 billion Pimco Total Return Fund.
The Janus Unconstrained fund, which started in May, received $66.4 million in September, according to Morningstar Inc., and had about $79 million under management at the end of September, according to data compiled by Bloomberg. The fund has lost 0.2 percent in the past month, trailing 76 percent of peers.
The market anticipated $25 billion to $50 billion in new assets after Gross joined, which may be "setting up for possible disappointment," Citigroup Inc.'s William Katz wrote in a report to clients Oct. 3.
Performance Fees
Janus has about $174.4 billion in assets, mostly in stock funds. Third-quarter revenue climbed 8.9 percent to $237 million as fees for managing investor money rose.
The firm is expanding its presence in exchange-traded products by buying the parent company of VelocityShares, which offers products including exchange-traded funds and notes that track swings in market volatility. Janus agreed to pay at least $30 million for the company.
"With Bill's arrival and the acquisition of VelocityShares, we have an opportunity to develop future products in the exchange-traded product space," according to the presentation.
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