It's safe to say that before legendary bond investor Bill Gross moved to Janus
Capital Group Inc. from Pacific Investment Management Co., there was not a lot of attention focused on Janus as a fixed-income shop, and there was perhaps even less interest in Gibson Smith, the chief investment officer overseeing the firm's bond business.
Mr. Smith, 46, joined Janus in 2001 when the fixed-income business had just seven people responsible for less than $2 billion. With $174 billion in total assets under management, Janus still is primarily an equity shop, but the fixed-income business now includes 31 people helping to manage $33 billion.
For his part, Mr. Smith is still adjusting to the new attention on both himself and Janus' fixed-income business, while embracing the changes that are likely to come.
“It has been fun to watch. We've had a lot of conversations over the past several weeks,” he said in a recent interview.
InvestmentNews: Were you in-volved in the process of bringing Bill Gross on board?
Gibson Smith: Yes. Dick Weil, our CEO, came to me in a very open and transparent manner. He was very much engaged with me during the process.
InvestmentNews: As the head of Janus' fixed-income business, are you Mr. Gross' boss?
Mr. Smith: No. We are both reporting directly to Dick Weil. There are now two fixed-income businesses. Bill Gross will have a top-down, macro approach in Newport Beach [Calif.].
And our business here in Denver will continue to be fundamentally driven, bottom-up. Allowing those two businesses to run independent and simultaneously was the plan.
InvestmentNews: How closely are you working with Mr. Gross?
Mr. Smith: We're doing everything possible to help him get situated, and we will continue to be a great partner to him.
Going forward, I would imagine we would be able to get on the phone and talk strategies together. I look forward to working with him, tapping into his knowledge and understanding about the markets.
InvestmentNews: Recent outflows at Pimco could be seen as a downside to a single-manager focus, versus a team management system. What are your thoughts on single — and potential star — managers, versus a team approach?
Mr. Smith: We have a team-based process here, but Darrell Watters and I are the primary managers on a number of funds.
In my experience, sometimes with a team-based process it can be difficult to attribute accountability.
InvestmentNews: Is it becoming more difficult to make a case for active bond funds in an environment where interest rates appear likely to trend higher?
Mr. Smith: In terms of being a passive investor, there are a lot of risks out there that are being overshadowed.
Passive investors are taking on a tremendous amount of rate risk, because being passive you have an implicit bullish bet on rates going down. This is a ripe time for active fixed-income management.
