Janus to Launch Active Bond ETF, Taps Bill Gross' Co-PM as Manager

Jul 28 2016 | 10:27pm ET

By Trevor Hunnicutt (Reuters) - Janus Capital Group on Thursday said it plans to launch its first bond exchange-traded fund this year, shifting legendary bond investor Bill Gross' co-manager into a new role.

The Janus Short Duration Income ETF, which will be actively managed in part by Kumar Palghat, will aim to deliver returns of 2 to 3 percent above the benchmark three-month London interbank offered rate.

Palghat is stepping down from his role as portfolio manager of the Janus Global Unconstrained Bond Fund, which he has run with Gross since July 2015, Janus said in a statement. Palghat joined Gross' team after Janus took a majority stake in his prior company, Kapstream Capital.

The planned fund launches Denver-based Janus into a fast-growing segment of the ETF industry that builds bond portfolios. The company made a splash in 2014 by hiring Gross from the company he co-founded, PIMCO. Palghat and Gross had previously worked together there.

Janus made forays into ETFs and similar products the same year, acquiring the company behind VelocityShares, known for their "leveraged" funds, some of which aim to triple the day's returns in the oil, gold or other markets.

Since then, Janus has launched a suite of its own ETFs, including some that aim to profit on the markets for long-term healthcare, combating obesity and organic food consumption.

Pending regulatory approvals from the U.S. Securities and Exchange Commission, Janus expects to list the new bond fund around October.

Short-duration funds focus on bonds and other debt securities that will be repaid soon and are relatively resilient to rising rates, which erode a bond's value.

The Federal Reserve raised its benchmark overnight lending rate in December for the first time in nearly a decade and had been expected to continue tightening monetary policy in 2016. The U.S. central bank has so far this year held rates steady.

U.S.-listed bond ETFs have grown 26.7 percent over the last year, counting cash inflows but not market performance, through the end of June, according to fund researcher Morningstar Inc. That is faster than the overall industry's 9.8 percent growth rate during that period.

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