As we break into summer, a lot is concentrating our minds at GBN.
Shortly after Jack Bogle’s passing, legendary bond king Bill Gross retires
After famously co-founding the Pacific Investment Management Company (PIMCO) in 1971, followed by a brief stint as a professionnal blackjack player in Las Vegas, Bill Gross recently announced that he would retire from the financial arena, bidding farewell to his latest employer Janus Henderson.
A force to be reckoned with
Although Vanguard‘s legendary long-term investor Jack Bogle pioneered one of the most successful market approaches to date – matching a fund’s performance to that of a benchmark index while minimizing transaction fees – the industry titans still recognize Bill Gross as a rival to be reckoned with.
Gross’ oustanding acuity of financial markets not only helped him pick the right securities at the right time, but also skillfully structure the timeframe of his portfolios’ duration.
On more than one occasion, his uncanny judgment lead him to push bond maturities just a bit longer or shorter than what the markets were betting at the time. His views were further magnified by his eagerness to expound his theories on television, contrary to most fixed-income managers who usually kept to themselves.
His singular talent, combined with the kind of publicity he was generating, lead to heaps of money flooding in. The assets of PIMCO’s Total Return fund, which he personally managed, reached a record $293bn in 2013.
However, while Mr. Gross excelled at hiring the smartest brains in the market, his judge of character failed him when it came to assessing their loyalty. Following a coup in 2014, Mr, Gross left PIMCO to join Janus Henderson, another smaller fund manager. Although scores of clients had fled PIMCO after his departure, with some following him to his new employer, Gross had lost his Midas touch.
His performance began to flatten out, ushering in a steady flow of redemptions instead. Currently, half of the remaining $950m that he manages comes from his personal wealth.
The rise and fall of yet another mortal
Several theories have been given to explain the king’s fall. For one, shrewd investors have been able to study and copy his techniques over the years. Another possible reason relates to the changing nature of debt markets, which have altered their course several times over the past half-century.
Shortly after the news of his retirement broke, Gross admitted in a televised interview that perhaps his greatest mistake occured when he misjudged the relative trajectories of American and German interest rates. Additonally, other aspects of his personal life might have taken their toll as his quarrel with PIMCO was paralleled by a messy divorce, which was heavily covered in the press.
What next for the retiring legend
Gross will now focus on managing his own money and his $390m charitable foundation. His departure follows the recent passing of Jack Bogle, the key architect of Vanguard’s approach of efficiency over genius.
It is worth mentioning how Gross and Bogle both embodied an era of fund management culture that no longer exists today, which underscores just how much the money-management industry itself has changed over the two men’s storied careers.
Source: The Economist : “Bill Gross, the king of the bond market, abdicates