Bill Gross’ New Boss | Chief Investment Officer

Enrique Chang, Head of Investments, JanusJanus Capital has a new investment chief: Enrique Chang, formerly CIO of equities and asset allocation.

The Denver, Colorado-based asset manager promoted Chang to president and head of investments, effective April 1.

Chang now oversees Janus’ fixed-income teams, the firm said, in addition to the equities and asset allocation groups.

PIMCO founder Bill Gross joined Janus in 2014 as the lead portfolio manager for a new global unconstrained bond fund.

Want the latest institutional investment industry news and insights? Sign up for CIO newsletters. 

Gross’ fund contributed $1.3 billion to the $192 billion Janus Capital Group managed across its three brands (Janus, Intech, and Perkins Investment Management) at the end of 2015, according to firm figures.

Chang joined Janus in September 2013—a year prior to Gross’ high-profile arrival—from mutual-fund competitor American Century Investments.

Janus’ company-wide assets under management have grown by roughly $35 billion since Chang’s hiring two-and-a-half years ago.

In the new role, he “will partner with CEO Dick Weil and President Bruce Koepfgen,” Janus said in the announcement.

Weil praised Chang’s “significant contributions to the firm” since arriving in 2014, and predicted he will “play an important role” in the firm’s strategy as investment chief.

Note: An earlier version of this story indicated that Bill Gross reports to Chang, due to an oversight in the original announcement. Gross reports to Weil.

Measuring performance relative to benchmarks has inverted the relationship between risk and return, London School of Economics (LSE) researchers have argued.

“Capitalism is in danger of dying by its own sword unless the present absurdities are recognized and addressed.”Not only does benchmarking cause high-volatility securities and asset classes to offer lower returns than low-volatility ones, it also gives rise to sector bubbles and herding behavior, according to finance professor Dimitri Vayanos and research fellow Paul Woolley.

“Obsession with short-term performance against market cap benchmarks preordains the dysfunctionality of asset markets,” they wrote. “The problems start when trustees hire fund managers to outperform benchmark indexes subject to limits on annual divergence.”

The duo acknowledged that there are benefits to using a benchmark as part of a given mandate, including that it offers a point of comparison for the fund’s returns and provides a defined objective for the manager.

For more stories like this, sign up for the CIO Alert newsletter. 

However, they argued that benchmarking exacerbates inefficiencies in the market by rewarding momentum strategies, wherein short-term investors acquire popular securities as they rise in price, with the intent of selling when they begin to fall.

Meanwhile, long-term managers who are underweight these superficially rising assets suffer as being underweight causes them to underperform the benchmark.

“If a security doubles in price and the investor is half-weight, the mismatch doubles; if he is double-weighted and the price halves, the mismatch halves also,” Vavanos and Woolley wrote. “Underweight positions in large, risky securities therefore have the greatest potential to cause a manager grief.”

According to Vavanos and Woolley, this need to satisfy the tracking constraints of a benchmark forces value managers to buy bubble stocks they know to be over-priced.

“The overall market becomes permanently over-valued and prone to sector bubbles,” they wrote.

Rather than relying on a market-cap benchmark, the LSE economists said asset owners should compare manager performance against that of value investors. That way, managers are incentivized to invest on the basis of fundamental value rather than momentum.

“Capitalism is in danger of dying by its own sword unless the present absurdities are recognized and addressed,” they concluded.