Wed, Feb 06, 2019 - Page 5 News List

Gross’ retirement marks twilight of bond-star era

SOLOIST:In his prime, Bill Gross managed more money than almost anyone, and experts from Wall Street to the US Federal Reserve followed him for market cues

Bloomberg

Bill Gross is not just retiring from money management. He is marking the twilight of an era.

Gross, 74, announced on Monday that he was ending his 47-year career managing investments, leaving the daily grind as his Janus Henderson Global Unconstrained Bond Fund bleeds assets and barely breaks even after fees. At Janus, Gross was given the freedom to do anything he wanted, but his fund ended up not doing much of anything.

For investors, his exit comes as the decades-long bull market in bonds, which fueled his success, is waning and interest rates climb off the post-crisis floor. For the industry, Gross’ recent struggles show how hard it has become for individual managers to beat the indices, algorithms and sprawling trading teams that oversee today’s portfolios.

“You don’t want to be a soloist, especially not in fixed income,” Dan Fuss, who runs a bond fund as vice chairman of Loomis Sayles & Co, said in a phone interview. “That doesn’t work, no matter how talented you are.”

Influential individuals such as Jeffrey Gundlach of DoubleLine Capital remain, but in his prime, at Pacific Investment Management Co (PIMCO), Gross managed more money than almost anyone, and experts from Wall Street to the Federal Reserve followed him for market cues.

As his reputation spread, he became such a frequent business TV guest that PIMCO installed a studio in the office.

Gross’ last few years at PIMCO were a struggle, however, and when he left, the firm made a point of naming a three-member team to replace him as head of the flagship Total Return fund. Gross’ switch in 2014 to what became Janus Henderson Group PLC was heralded as a new beginning, but his unconstrained fund, which invested wherever Gross saw opportunity, lagged its rivals.

Even Gross conceded he had difficulty.

“Maybe I should have stuck to total return and been more constrained,” Gross told Bloomberg TV on Monday.

Even other top-performing managers, such as Gundlach, rely on a support team for new ideas and risk management. Gundlach started DoubleLine in 2009 with more than three dozen colleagues from his former firm, TCW Group Inc. Gross mostly operated as a one-man band the past few years and, at times, admitted he missed the often testy matching of wits that underpinned investment decisions at PIMCO.

Last year, his unconstrained fund suffered a one-day 3 percent loss on a misplaced bet that rates would converge between German and US bond yields. Gross said on Monday on Bloomberg TV that last year’s outsized rate bet violated the investing model he pioneered at PIMCO.

Gross may be a cautionary tale about the pitfalls of a solo star actively pulling investment levers, but there was no mistaking his success.

“For many years and countless investors, Bill Gross was the most famous and one of the best-performing bond managers,” said Todd Rosenbluth, director of ETF and mutual fund research for CFRA.

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