Janus Capital Group Inc. wants a bigger share of the red-hot bond market.
Janus Capital Group Inc. wants a bigger share of the red-hot bond market.
Richard M. Weil, a 14-year veteran of Pacific Investment Management Co. LLC who was chosen in February as Janus' chief executive, has put building Janus' fixed-income business at the top of his to-do list.
As part of its push, Janus plans to launch a number of global-fixed-income funds for both non-U.S. and U.S. advisers in the coming months, said Colleen Denzler, senior vice president and head of fixed-income strategy at Janus Capital Management LLC.
“Many of the top-line managers have struggled, so people are looking for diversification from that,” she said.
Expanding into global fixed income makes sense right now as more people look abroad for better yields than available from U.S. Treasuries, said Tom Roseen, a research manager at Lipper Inc. Through Aug. 25, $9.4 billion had flowed into emerging-markets debt funds this year, compared with $9.8 billion for the prior five years, according to Lipper.
“People are asking where they can get better bang for their buck,” Mr. Roseen said. And Janus' bottom-up approach to its research should allow it to differentiate itself, he said.
“You have a lot of people out there saying that this economy or that economy is good, but at Janus you have people on the ground, kicking the tires of the companies there,” Mr. Roseen said.
Q. What funds do you expect to launch in the global-fixed-income area?
A. I would expect to see the first products that we launch in the non-U.S. investment side of the house to be from the credit perspective, such as a global-high-yield [fund] and a global-investment-grade product.
Those are at the top of our list in the not-too-distant future.
In the next six to nine months, I would expect to bring out global products for U.S. advisers.
Q. When we interviewed Richard Weil in May, we talked about whether Janus was late with its fixed-income push, given the fears of inflation. Now everyone is talking about deflation. Are you worried about that?
A. We are not predicting a deflationary environment. We do think there is “disinflation,” which means we think there will be inflation at a lower pace than long-term averages. We are creating a macro view about the U.S. economy, about interest rates, about the [Federal Reserve] and about inflation, based on our conversations with individual companies. We are asking the companies what they see on prices, and we ask about inventory. At the beginning of the year, we saw a small amount of inflation on the producer level with regards to commodities and metals, and those types of areas. That has slowed down. As we look past the producer prices and into the consumer prices, what we are seeing is that two-thirds of the Consumer Price Index is actually declining — not at the level that will lead to deflation but at a disinflationary level.
Q. How are you managing your portfolios in light of this “disinflation?”
A. We are going to take the ap-proach that we always take, which is corporate credit. Corporate credit has some natural tendencies that will help if inflation becomes a problem. If disinflation continues, we have the flexibility to go in and out of Treasuries and manage the durations and key-rate durations based on that. That differentiates us from index managers.
Q. What is your outlook for the next six to 18 months?
A. We have one more leg of yields going down. We think with inflation where it is right now, and with concerns over economic recovery globally, there is room for yields to go down a little bit more before they bottom out. We don't think we are in negative gross-domestic-product territory, and we don't predict a double dip. But in the next six to nine months, we do think as the economy continues to repair in those industries that are doing well, we will start to see growth coming back. It may not be at a dramatic fashion, and that will facilitate yields going up eventually.
Q. What is the top concern you hear from financial advisers?
A. The bond bubble. In 2007 and 2008, advisers were building portfolios for their clients based on their clients' perceived risk tolerance and based on what had happened in the market.
Those portfolios were pretty equity-heavy, so when equities underperformed, it hurt them. But the bigger issue was that some of the bond managers also underperformed dramatically, so the part of their portfolio that was designed to have low correlation to equities didn't act like that. Advisers really want to go back to bonds, but they don't want to go back if years from now, they have negative returns that they need to explain to their clients. That's their biggest fear.
E-mail Jessica Toonkel at jtoonkel@investmentnews.com
