Legendary bond manager Bill Gross to retire after four decades

He struggled in the last four years as head of the Janus Henderson Global Unconstrained Bond Fund

“I’ve had a wonderful ride for over 40 years in my career - trying at all times to put client interests first while inventing and reinventing active bond management along the way,” Mr Gross said in a statement Monday. BloombergShow less

Bill Gross, who transformed bond investing over a storied four-decade career, is leaving the stage after a tough final chapter.

Mr Gross, who announced his retirement Monday, struggled in the last four years as head of the Janus Henderson Global Unconstrained Bond Fund. His performance failed to match the stellar track record he achieved while building Pacific Investment Management’s Total Return Fund into a bond giant.

“I look back on it and the performance of the unconstrained fund in the past four years with Janus has been unsatisfactory, no doubt,” Mr Gross said in an interview with Tom Keene on Bloomberg TV. “Maybe I should have stuck to total return and been more constrained.”

Mr Gross joined Janus Henderson Group in late 2014. At Janus, Mr Gross has seen assets in his unconstrained fund plummet and annualised returns of less than 1 per cent. Responsibilities for the fund will be assumed by the team that has been supporting Mr Gross, Janus said.

In his next phase, Mr Gross, 74, will focus on managing his personal assets and remain active in charitable endeavours, according to a statement from Janus. He has made philanthropic donations of $800 million in the past 20 years.

The billionaire money manager started his latest chapter with fanfare, compared by Janus chief executive Dick Weil to Super Bowl-winning quarterback Peyton Manning, “that game-changing level of talent”.

Mr Gross poured $700 million of his personal fortune into the unconstrained fund. The go-anywhere fund lost almost 4 per cent in 2018, sparking a stream of investor redemptions that drove assets below $1 billion from the peak of $2.24 billion early in the year. Mr Gross blamed losses during the year’s first half partly on a misplaced bet that rates on US Treasuries and German bonds would converge, a position he eventually scaled back.

“The sort of underperformance we’re seeing is challenging and disappointing to him more than any of us,” Mr Weil said in an interview last August.

When Mr Gross joined Janus, he knew time was limited to prove he retained his market mastery.

“I won’t have five to 10 to 15 years leeway like I had at Pimco to do that, but certainly for the next two, three, four years,” Mr Gross told Bloomberg TV in 2015. “I’m a very competitive person and I like to post numbers that are better than the market and better than the competition.”

Mr Gross’s sudden exit from Pimco, which he helped build into one of the world’s preeminent fixed-income money managers, jolted clients and advisers. At Janus, he became essentially a solo act operating from Newport Beach, California, with a much smaller supporting cast. His only co-manager, Kumar Palghat, left the fund after a year.

At Pimco, Mr Gross had racked up one of the longest winning streaks of any money manager. The Pimco Total Return Fund, which he founded in 1987, became the world’s biggest mutual fund as assets swelled to almost $300 billion at its 2013 peak, generating annualized returns of 7.8 per cent from inception through his last day.

“No other fund manager made more money for people than Bill Mr Gross,” Morningstar said in January 2010, when it named him fixed-income manager of the decade.

On Monday, Scott Minerd, chief investment officer of Guggenheim Partners, said of Mr Gross: “Not only is he a true leader and a great philanthropist, but he is also a personal hero.”

Mr Gross, an Ohio native, was a gambler before he became an investor. He taught himself blackjack card counting from the book “Beat the Dealer” while recovering from a car accident during college. After graduating from Duke University, he turned $200 into $10,000 over four months in Las Vegas, raising the tuition for his MBA at UCLA.

He became a bond manager almost by accident, getting a job in the fixed-income department of Pacific Mutual Life Insurance Co. in Los Angeles in 1971, where he was assigned to a new program that actively traded bonds. It was there he developed his total return strategy that generated income from both bond coupons and prices.

As Mr Gross’s reputation spread, he became such a frequent business TV guest that Pimco installed a studio.

“Most money managers would opt for the lean green, most politicians for power,” he wrote in a 1997 book on investing. “Perhaps only the artist would choose fame at the expense of the other two. I guess that’s what I am at heart - an aspiring artist who happens to be well paid for doing something.”

Pimco thrived on Mr Gross’s record as a fixed-income whiz, a feat aided by an historic bond bull market that began in the early 1980s when interest rates began a prolonged decline. Experts from Wall Street to the Federal Reserve followed the firm for market cues.

Runner

Mr Gross drove himself obsessively. A former devoted long-distance runner, he once raced from San Francisco to Carmel, California, and became hospitalised with kidney damage.

Pimco’s assets swelled after the 2008 financial crisis, when the Total Return Fund and other accounts produced gains even as stocks plunged.

But a few years later, his performance wobbled. Total Return lagged peers in 2011 and again in 2013, exacerbating friction between Mr Gross and colleagues. In early 2014, chief executive and co-CIO Mohamed El-Erian quit.

Mr Gross sought to weed out managers he suspected of disloyalty, spurring executives at Pimco’s parent, German insurer Allianz SE, to intervene. Mr Gross eventually jumped ship before he could be thrown overboard. On September 26, 2014, he left a handwritten note announcing his resignation as of 6.29 am Pacific time - one minute before New York markets opened.

Investors withdrew hundreds of billions of dollars, little of which followed Mr Gross to Janus Capital, as the firm was known before its 2017 merger with Henderson Group. On Monday, Mr Gross was looking ahead.

"I’m off - leaving this port for another destination with high hopes, sunny skies and smooth seas," he said.