U.S. Markets close in 5 hrs 4 mins

A thousand miles apart, Janus bond chief Smith embraces Gross

Richard Weil, Chief Executive Officer of Janus Capital Group, poses for a portrait in New York February 5, 2013. REUTERS/Adrees Latif

By Ross Kerber and Richard Leong

BOSTON/NEW YORK (Reuters) - Before hiring star bond fund manager Bill Gross last month, Janus Capital Group Inc (JNS.N) Chief Executive Dick Weil took care to check with the bond chief he already had, Gibson Smith.

Smith said he has embraced the idea, despite concerns in the industry that Gross may not be enough of a team player. Smith said on Tuesday he plans to stay at Janus, with his team intact, after Weil said continuity was important.

Weil "wanted to maintain what we have built and not do anything disruptive," Smith said.

"This is good for the Janus fixed-income business and good for Janus as a whole," Smith said of Gross' move in a telephone interview.

Smith said he expects to talk about markets with the one-time Pimco leader. But they will be about 1,000 miles apart.

The two will operate two distinct business units, with Gross operating out of a Newport Beach, California office, which Smith called "Janus West." Smith works from Janus headquarters in Denver. Pimco is headquartered in Newport Beach.

The comments from Smith are among his first since Gross's arrival and could reduce concerns voiced by some investors that the famously outspoken Gross could spark a culture clash at Janus, which emphasizes teamwork over star power.

Gross's surprise jump to Janus triggered heavy outflows at Pimco, which he co-founded. Even more money could be pulled from Pimco as pension funds and other large investors review whether to move their money.

Pimco said its Total Return fund, which Gross personally managed for 27 years, saw $23.5 billion in withdrawals in September.

As of June 30 Janus had $178 billion under management including $31.4 billion in fixed income products. With actively managed equity funds out of favor, Weil has put a new emphasis on bonds, which accounted for just $5.5 billion of company assets in 2008.

Janus shares ended regular trading on Tuesday at $14.40, or 30 percent higher than their close on Sept 25, just before the hiring of Gross was announced.

Smith said Gross will fit in well, developing macro products distinct from Janus' current bond funds focused on fundamental research. Gross is taking over a young fund, the Janus Global Unconstrained Bond Fund (JUCAX.O), which Smith called "the perfect product to move to him" as a vehicle for new investors.

Meanwhile ideas that once would have gone to the fund will stay within other products managed by Smith's 30-person team.

Smith said he expects more volatility as traders speculate on the timing of the Federal Reserve's first interest rate increase. He also worries a dollar rally that began this summer could hurt domestic exporters.

He said he has tried to play defense across some funds, such as scaling back exposure to corporate bonds and adding 10-year and 30-year Treasuries and short-dated debt.

When it came to adding Gross, Smith said Weil liked the idea. "Dick came to me in a very open, transparent and supportive fashion presenting this as a possibility," Smith said of Weil.

"How this will be good for me and my team, he (Weil) has been very consistent on these points," Smith said.

(Reporting by Ross Kerber in Boston and Richard Leong in New York; Editing by Diane Craft, Tim McLaughlin and Steve Orlofsky)