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"What I'm doing with Janus Unconstrained, is certainly not
owning high-yield bonds, and in some cases, yes, shorting what
we call High Yield CDX, the index," Gross told cable television
network CNBC.
The Markit CDX North American High Yield index is composed
of 100 liquid North American entities with high yield credit
ratings that trade in the CDS market.
Gross said illiquidity in the high-yield market, especially
among high-yield exchange-traded and closed end funds, had been
exposed. The Barclays U.S. Corporate High Yield index has fallen
1.3 percent so far this month through Tuesday.
Gross, who recommended in June shorting the China Shenzhen
Composite Index before its huge slump, told CNBC on Wednesday:
"It’s not necessary to short the Chinese stock market, matter of
fact it’s very dangerous, what you do is you look outside the
Chinese economy."
He recommended taking advantage of the "increasing risk
atmosphere" and volatility in other markets that the declining
Chinese stock market generated.
Gross' comments on high-yield ETFs came after activist investor
Carl Icahn said earlier this month that he was concerned about
illiquidity in the high-yield ETF market and feared the
consequences of a potential sell-off in high-yield ETFs once the
Federal Reserve hikes interest rates.
Gross' recent string of bold calls at Janus, including his
"short of a lifetime" trade against German Bunds, has not
translated into profitable trades.
"My famous (infamous?) 'Short of a lifetime' trade on the German
Bund market was well timed but not necessarily well executed,"
Gross wrote in his June investment outlook report to clients. He
did not elaborate on the execution of the transaction.
In addition, Gross never executed the China Shenzhen Composite
Index short trade.
(Reporting by Sam Forgione; Editing by Jennifer Ablan and Tom
Brown)
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