Contributing greatly to the firm's decline in institutional assets were outflows at its quantitative equity subsidiary, INTECH.
INTECH, with $51.1 billion under management as of March 31, had more than $6 billion in net outflows in the two years ended Dec. 31, Janus statistics show. INTECH's first-quarter 2015 results continued the trend with another $1.3 billion in net outflows. More than $32 billion of INTECH's total AUM is from U.S. institutional clients.
Mr. Weil said INTECH has suffered from both performance issues in some of its U.S. equity strategies and a trend by institutional clients to barbell their portfolio, investing in both passive and active strategies. “INTECH can be left in the middle, they are neither passive nor wildly risking,” he said.
INTECH CEO Jennifer Young stepped down at the end of 2012 and Mr. Weil assigned the title to Adrian Banner, the firm's chief investment officer.
Mr. Weil praised Mr. Banner for better integrating INTECH's Princeton, N.J.-based investment team and the sales and marketing teams in West Palm Beach, Fla., saying efforts weren't as coordinated as they could have been. Mr. Weil would not go into detail on the reasons surrounding Ms. Young's departure.
Mr. Weil also has faced issues at a smaller Janus subsidiary, Perkins Investment Management in Chicago, which manages around $10 billion. Perkins CEO Peter Thompson left at the end of last year and his successor, Jeff Kautz, stepped down in early April. The firm has subsequently lost its director of research and a research analyst.
Sources say disagreements between Mr. Weil and senior management at Perkins over the firm's underperformance in its value equity strategies had created tensions.
Another diversification effort by Mr. Weil, launched in early 2013, was to offer separate liquid alternative funds for institutional and retail investors. It has not fared well. The strategies combined have attracted less than $70 million as of March 31, company statistics show.
Acknowledging the strategies have “gotten off to a slower start than we would have liked,” Mr. Weil said he remains optimistic they will eventually garner investor interest.
Mr. Weil's most visible move was the hiring of Mr. Gross, who had been one of Mr. Weil's bosses at PIMCO.
“My secretary called me and said "I've got Bill Gross on the phone for you,' he recalled. Mr. Weil said Mr. Gross then asked him, “'If I became available, would you have a place for me at Janus?' My jaw dropped. ... Here is the greatest fixed-income investor over the last 40 years on planet Earth, and we run an investment company. Of course we'd want” him, Mr. Weil said.
Analysts who cover Janus had predicted Mr. Gross could bring as much as $45 billion to Janus by the end of 2016. So far, however, the unconstrained fixed-income fund Mr. Gross is running has attracted $1.5 billion, with a little less than half of it being Mr. Gross' own money.
Mr. Gross had managed as much as $300 billion as portfolio manager of PIMCO Total Return Fund.
An investment consultant who requested anonymity said Mr. Gross' sudden departure from PIMCO and his subpar investment record in his final year there have made institutional investors uneasy about moving assets to his strategy at Janus. He said Mr. Gross will need to demonstrate a multiyear track record of strong performance before he starts getting institutional money.
But consultant Michael Rosen, founder and CIO of Angeles Investment Advisors, Santa Monica, Calif., believes institutional money could flow to Mr. Gross sooner than the usual three-year track record if he can adequately articulate his investment process to potential investors.
Mr. Weil said he is pleased with the amount of assets Mr. Gross has raised so far.
“The assets raised and the success so far have been significant on a Janus scale and we feel good about it,“ he said. “Where questions get raised is when people compare it to a PIMCO scale, and that's not really relevant to who we are and what we're doing.” n