The plunge in oil prices has claimed another prominent victim.
Bill Gross’ $1.46 billion Janus Global Unconstrained Bond Fund trailed its benchmark in the fourth quarter of last year primarily because it had plowed about 5 percent of net assets into debt issued by U.S., Russian and Brazilian energy companies, according to a quarterly overview published on the Denver-based firm’s website. Those bonds and emerging market sovereign debt that Gross agreed to insure were all hit by the 42 percent collapse in crude prices during the period.
“Energy sector exposure detracted the most from the fund’s performance,” Janus said in the fourth-quarter commentary, adding that “exposure to U.S. dollar-denominated Russian and Brazilian corporate bonds” also hurt. “The sharp decline in crude oil prices” along with the declines of the countries’ currencies “drove underperformance here.”
The commentary provides the first detailed insight into how Gross used his flexibility to run the Janus fund, which can invest across bonds worldwide and seeks to outperform the three-month London Interbank Offered Rate, or Libor.
Janus Unconstrained declined 0.56 percent during the fourth quarter after including dividends, compared with the 0.06 percent return of the three-month Libor.
Gross’s bet on energy bonds may have been premature, said Matthew Mish, a credit strategist in New York with UBS AG. Other managers of these nontraditional bond funds and hedge funds were waiting for the volatility in the crude oil prices to cool before buying.
