Janus Capital has acquired 51% stake in Sydney-based fixed income fund manager Kapstream Capital from investment manager Challenger.

New York Stock Exchange-listed Janus Capital bought the stake for an upfront cash consideration of $85m. It also has the option to buy the remaining 49% interest in the future.

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Kapstream, which was established by PIMCO Asia-Pacific veterans Kumar Palghat and Nick Maroutsos with Challenger’s funding in Australia in 2007, managed $6.6bn in assets as of 31 March 2015.

Bill Gross, who joined Janus in September 2014, will remain the primary portfolio manager of the Janus Global Unconstrained Bond strategy, with Palghat supporting him as co-portfolio manager, Janus said in a statement.

Palghat will remain portfolio manager of the Kapstream Absolute Return Income Fund. The strategies for both will not change.

The combined Janus Global Macro Fixed Income team, which will consist of 15 professionals following the completion of the transaction, will operate jointly from Kapstream’s existing base in Sydney, Australia, and Janus’ Newport Beach, California, office.

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With this deal, the total Janus Global Macro Fixed Income assets under management would be $8.7bn as of 31 March 2015.

Janus Capital CEO Dick Weil said: "This transaction underscores three key commitments at Janus. First, we want to be the place where great investors come to invest. Kapstream’s Kumar Palghat, Steve Goldman and Nick Maroutsos are simply great people and great investors.

"Second, we passionately believe that given volatility in global rates, investors need excellent fixed income choices that offer less exposure to interest rate risk. Third, the acquisition of Kapstream furthers our commitment to expand our fixed income capabilities as part of the firm’s intelligent diversification strategy."