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Janus Buys VelocityShares, Giving Gross Fixed Income ETF Launching Pad: Morningstar

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Janus Capital’s acquisition Monday of VS Holdings, the parent company of VelocityShares, a provider of unique institutionally focused exchange-traded products, including exchange-traded funds, should serve as a “platform” for new Janus hire Bill Gross to “roll out fixed-income ETFs,” says Morningstar analyst Gregg Warren.

While VelocityShares held “a rather small” $2 billion in assets under management at the end of September, Warren says, the acquisition also will allow Janus to expand its reach to institutional clients.

Indeed, Janus Capital CEO Richard Weil said in a Monday statement that the $30 million acquisition positions Janus “within the rapidly growing rules-based and active ETF universe, enhancing the customized solutions we can provide to our clients and enabling us to work with the growing segment of financial advisors and institutions focused on these instruments.”

A Janus spokesman told ThinkAdvisor in an email message that while Janus does not currently offer ETFs, “Janus expects to bring new, innovative exchange-traded products to market over time utilizing its global macro and other fixed income, liquid alternative and asset allocation disciplines.”

Janus’ acquisition of VelocityShares, which is expected to close in the fourth quarter, “is a continuation of our strategy of ‘intelligent diversification,’ adding new talent to support innovation and smart solutions for our clients,” Weil added in the statement.

Janus had nearly $178 billion in assets under management at the end of the second quarter.

VelocityShares, managed by Nick Cherney, Richard Hoge and Steve Quinn and headquartered in Darien, Connecticut, has 11 employees, many of whom are ETF industry veterans and have extensive product development, product structuring and sales experience.

“Janus’ global distribution network and commitment to product development creates very unique opportunities to deliver institutional quality ETFs to a wide range of investors,” said Nick Cherney, VelocityShares’ co-founder and chief investment officer, in a statement. “Our combined company will be well positioned to grow our ETP business and continue to be a leading provider in the marketplace.”

Gross left PIMCO to join Janus in late September, and will manage the new Janus Unconstrained Fund (JUCIX), which Sumit Desai, analyst, active strategies, manager research at Morningstar said on a recent conference call “is very different” from the huge Total Return Fund that Gross oversaw at PIMCO.

Gross “will have a more wide-ranging” investment mandate in the Janus fund than he did in managing Total Return, Desai said, and “no limit on the high-yield bond exposure that the fund can hold.”

John Hale, director of manager research, North America, added on the conference call held by Morningstar’s fixed-income team that while the Total Return Fund has seen “significant outflows,” PIMCO has “sufficient liquidity” to handle those outflows—at least in the short term.

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