The competition between Pimco and Janus did not end when Bill Gross settled his lawsuit against his former employer in March this year. The two companies continue to vie with each other in many sectors, albeit without the same personal edge.
One of the keenest rivalries between the two groups is in the Multi-Sector Income Bond sector, where Pimco’s Diversified Income and Income funds and Janus Henderson’s Multi- Sector Income fund have topped the table over the past three years.
In both total return and risk-adjusted terms over that timeframe, Pimco’s Citywire AA-rated pair of Alfred Murata and Daniel Ivascyn have the advantage, beating Janus’ A-rated team of John Kerschner, John Lloyd and Seth Meyer.
The major difference between the two Pimco portfolios is the greater allocation to high yield and emerging markets in the Diversified Income fund. The Income fund has a combined 86.7% gross in treasuries, liquid rates and mortgage-backed securities. Meanwhile, the Diversified Income fund has just 49.9% gross in those spaces, with 31.1% in high yield and 40.6% in emerging markets, compared with 10.1% and 21.2% respectively in the equivalent areas for Income.
Beyond that, the Income portfolio is divided between higher-yielding assets that should benefit from robust economic growth and higher-quality assets that should prove resilient if economic growth is weak.
The latter portion contains duration exposure in countries such as the US and Australia, where the managers believe rates could fall. The former, on the other hand, has non-agency mortgage-backed securities and large quasi-sovereign emerging-market exposure.
Despite the nominally higher risk in the Diversified Income portfolio, the managers are currently positioned cautiously in a number of emerging markets with strong fundamentals. They also have several senior collateralized loan obligations and commercial mortgage-backed securities with expected downside resilience.
Meanwhile, the Janus Henderson Multi-Sector Income fund is heavily weighted to higher-income segments, with 36.5% in high-yield credit, 15.6% in commercial mortgage-backed securities and 15.1% in bank loans.
Nevertheless, Kerschner, Lloyd and Meyer are also cautious. They have noted that high-yield spreads are approaching the tightest levels of the cycle, while corporate issuers face weak revenue growth and increasing wage and healthcare costs. They have therefore concentrated on high-quality business models with strong balance sheets in traditionally defensive, non-cyclical sectors.
They are joined in this sector’s top five over the past three years by some new colleagues: Jenna Barnard and John Pattullo from the Henderson side of the union, who run the Janus Henderson Strategic Income fund.
This is far more geographically diverse than its Multi-Sector Income stablemate, which has 85% of its assets in the US. Barnard and Pattullo have just a 32.5% weighting there, with 30% in their native UK and most of the balance in other developed issuers.
Completing the top five for this timeframe are A-rated Matt Toms of the Voya Strategic Income Opportunities fund and AA-rated William Mason’s Spirit of America Income fund, which is only available to clients of David Lerner Associates, a broker-dealer headquartered in Long Island, New York.