Could Bill Gross Reach 10% Alpha At Janus?

In the week since Bill Gross left PIMCO the company has already faced tens of billions in outflows and it probably has more in its future as institutional investors reconsider where to keep their fixed income investments. The question is whether to follow Gross to Janus Capital Group Inc (NYSE:JNS) or simply look for a new manager. According to Claude Erb, a manager at TR, Gross could have as much as 10% alpha now that he’ll be managing a significantly smaller fund.

“Historically, a doubling in assets under management led to a 10-20% reduction in ‘alpha’,” he writes. “Naive extrapolation of the historical relationship between fund size and one year “alpha” suggests Bill Gross’ new ‘unconstrained’ bond fund could have an...