For $85MM, Janus Buys a Shop Co-Founded By a Pimco Vet
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Wednesday, July 01, 2015

For $85MM, Janus Buys a Shop Co-Founded By a Pimco Vet

Dick Weil is making another acquisition, bringing another Pimco veteran to Janus [profile], and expanding Gross' team to the other side of the Pacific, all in one fell swoop.

William Hunt Gross
Janus Capital Group
Portfolio Manager
This morning the Janus CEO closed an $85-million cash deal to buy a majority stake in Sydney, Australia-based Kapstream Capital Pty Limited, a global unconstrained fixed income manager with $6.6 billion in AUM (as of March 31). Denver, Colorado-based Janus has the option to buy the other 49 percent of Kapstream later, too. That works out to a valuation of about $167 million, or 2.53 percent of AUM, for all of Kapstream.

Bank of America Merrill Lynch advised Janus on the deal.

Richard MacCoy Weil
Janus Capital Group
Kumar Palghat and Nick Maroutsos co-founded Kapstream in 2006, and prior to that Palghat spent ten years at Pimco, at the same time that Weil himself and the bond king Bill Gross were there. Now the band is back together, but at Janus, and the whole Kapstream team is coming over, too.

Weil describes the deal as part of his "commitment to expand [Janus'] fixed income capabilities."

"This transaction will reinforce our efforts to build a global macro fixed income team offering best-in-class global unconstrained bond strategies," Weil states. "Combining the success and experience of Kapstream's unconstrained fixed income business with Bill's reputation as one of the world's most successful fixed income investors creates a powerful opportunity for our clients and for Janus Capital."

Kumar Palghat
Janus Capital Group
Managing Director, Portfolio Manager
Gross himself has been leading efforts to build out Janus' global macro fixed income business since he joined in September. The Kapstream deal more than quadruples the team's AUM to $8.7 billion and boosts the team's headcount 15 people between Newport Beach, California and Sydney. Gross will still be the primary PM for the global unconstrained bond strategy, though he will add Palghat as a co-PM. And Palghat will continue to PM the flagship Kapstream Absolute Return Income Fund, which is distributed solely in Australia.

Janus' fundamental fixed income team, led by fixed income chief investment officer Gib Smith, "will remain a separate, autonomous and distinct capability," per Janus' statement this morning.

Though Kapstream is based in Sydney, it expanded into the U.S. in 2013 by opening an office in Newport Beach, which is the hometown of both Pimco and Gross.

As of March 31, Janus had about $189.7 billion in AUM. The Kapstream deal follows Janus' purchase of ETF shop VelocityShares six months ago.

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