One of the big reasons why investors are increasingly interested in these types of funds is the current and anticipated future interest rate environment.
Low interest rates have led investors who seek income generating assets in the bond market to go beyond the Treasury and mortgage bond market, towards things like emerging market sovereign, as well as corporate debt. Both are places that unconstrained bond funds can go without fear of sticking to an established index.
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For those investors that believe that globally low interest rates will at some point normalize and head higher, many bond investors with index related holdings could see a trend of lower bond prices as those interest rates rise. Unconstrained bond funds are seen by some as a way to avoid much of the downside in a rising rate environment, given that managers don't have to hold the same types of instruments as underlying indices. Of course, the generation of "absolute returns," or the avoidance of losses is all contingent on how well the fund manager can predict and navigate markets.
Gross' departure from PIMCO for Janus also highlights an interesting view on how each fund management company wants to proceed with managing assets.
For Janus, it's counting on the name recognition that a manager like Bill Gross can bring to the company. Janus will be using Gross' reputation as a way to garner assets for its fund offerings.
PIMCO, on the other hand, is relying less on the name brand of one rock star manager, and touting the team approach that its company brings to the table. That team approach is a way to assure investors that just because one manager leaves, there will be continuity when it comes to investing style, and possibly future performance.
Now the question facing many financial advisors is…which is the preferred investing style? PIMCO hopes to keep clients from pulling assets from its unconstrained bond fund by touting its team of experts, while Janus is hoping to grow its $12 million unconstrained bond fund with the lure of investing with "bond king" Bill Gross.