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Regulation Amp Governance
Bill Gross’s pay at Janus kept secret
From the Financial Times of Sun, 19 Oct 2014 05:42:25 GMT
WASHINGTON - AUGUST 17: William H. Gross of PIMCO participates in a conference on the future of housing finance at the Treasury Department on August 17, 2010 in Washington, DC. Treasury Secretary Geithner hosted the future of housing finance conference with industry experts, leading academic experts and other stakeholders. (Photo by Mark Wilson/Getty Images)©Getty

Janus Capital and new star manager Bill Gross will dodge a potentially ugly fight with shareholders by not designating Mr Gross an executive, thereby keeping his pay private.

Mr Gross, who quit Pimco last month to run an unconstrained bond fund at Janus, has said he is happily shedding executive duties to concentrate on investing. As a rank-and-file portfolio manager, his total pay will remain secret, just as it did at Pimco.

Mr Gross’s pay will also remain exempt from any vote by Janus shareholders, who have a history of rebelling against steep executive compensation.

Janus chief executive Richard Weil’s pay has fallen nearly 80 per cent since taking the job in 2010, to $4.6m last year, after a series of shareholder votes either rejected or only tepidly approved his packages.

Shareholder sentiment prompted Janus last year to convene a meeting with shareholders on remuneration policies. It subsequently revamped its pay plan by adopting a “clear, formula-based approach” to calculating Mr Weil’s bonus, among other changes.

“If I were them, I would say he is not an executive officer, he is just another portfolio manager who we don’t have to disclose,” said Alan Johnson, managing director of Johnson Associates, the consultancy. “Because it is going to be a lot of money and a big distraction.”

The only indication of Mr Gross’s Pimco total pay appeared in a 2012 New York Times article, in which an unnamed source said to have knowledge of Pimco’s finances disclosed that he earned about $200m in 2011.

A spokesman for Janus did not return calls for comment.

Mr Gross’s stormy exit from Pimco and irascible reputation give Janus all the more reason to avoid any showdowns, said Mr Johnson.

“With his [Mr Gross’s] tumultuous background and reputation, I would not want to have a fight over his pay,” he said. “If you were Janus and you made this big bet on him, the last thing you want to do is to have another fight with him.”

Pimco has given Mr Gross the title of executive vice-president and charged him with building the company’s global macro fixed income strategies, but that does not make him a named executive for purposes of compensation disclosure.

Portfolio managers’ pay is typically a combination of a base salary linked to the amount of assets they oversee, plus a bonus, usually largely tied to performance, according to Bridget Hughes, associate director of fund analysis at Morningstar, the data provider.

“Managers with larger asset pools are paid a higher salary, and right now Bill Gross’s fund and assets are fairly small,” she said. “That is likely to increase, but whether they have factored that in [to the pay package] before he starts, who knows? I am sure he did not come cheap.”

Mr Gross’s fund has surged in assets since his arrival, from just under $13m to more than $79m, but it remains “a fairly small revenue generator right now”, Ms Hughes added.

The fund’s management fee of 65 basis points means it is providing about $500,000 in revenue.

Mr Johnson said Mr Weil, and possibly Janus’s chief investment officer for fixed income, Gibson Smith, are probably the ones responsible for drawing up Mr Gross’s compensation plan, which would require board approval “if it is significant”.

He expects the pay would be tied to a formula giving Mr Gross a certain percentage of the revenue from the products he oversees.

Though Janus need not disclose dollar figures, it does have to describe the approach it takes in calculating portfolio managers’ compensation. Its latest filings state that the manager of Mr Gross’s fund will be paid a base salary reflecting factors including performance, “the complexity of managing funds”, “scope of responsibility” and “skills, knowledge, experience, ability and market competitiveness”. Variable pay “is discretionary and is determined by Janus Capital management”.

“They can be pretty vague about it,” Ms Hughes said.

Will the bond king’s reign be beneficial for Janus?

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