Janus Capital Group Inc. said Monday that it will buy a provider of exchange-traded funds, a move that some analysts say will provide new hire Bill Gross a platform to launch his own ETF.
The Denver-based firm said it has agreed to acquire VS Holdings Inc., the parent company of VelocityShares LLC, a Darien, Conn.-based asset manager with about $2 billion under management, according to a news release from Janus. The transaction includes an upfront initial cash payment of $30 million and is expected to close in the fourth quarter of 2014.
The purchase “positions Janus within the rapidly growing rules-based and active ETF universe, enhancing the customized solutions we can provide to our clients,” Janus CEO Richard Weil said in a statement.
By purchasing an ETF platform, Janus has an easier way to allow Gross to open his own ETF, says Gregg Warren, a senior analyst with fund research firm Morningstar Inc.
Gross, the co-founder of Pacific Investment Management Co., left his former firm last month to run an unconstrained bond fund at Janus. At Pimco, Gross ran an actively managed ETF that executed a similar strategy to his massive Pimco Total Return fund. An exchange-traded fund is like a mutual fund but generally follows a basket of securities and is traded on an exchange. Janus, well-known for its actively managed funds, offers no ETFs, Warren said.
“It’s a good move on their part,” he said. “It gives Bill a platform for an ETF and opens up the door to talk to some institutional clients.”
Janus, like many asset managers that grew to prominence during the 1990s, has been slow to jump on the trend toward passively managed products.
The market for ETFs and index funds is dominated by Vanguard Group, BlackRock Inc. and State Street Global Advisors. Entering that market so late in the game would be “suicide,” Warren says.
At Pimco, Gross ran into trouble running his actively managed ETF, trading under the ticker symbol “BOND.” The Securities and Exchange Commission is investigating whether Gross artificially boosted returns in the fund following its launch in February 2012.
