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The Abdication of Bill Gross

Before Gundlach. Before Ivascyn. Before Rivelle. Before Minerd. Before Rieder. Before Leech.

There was Gross.

The investing world was buzzing yesterday when it was announced that Bill Gross, at age 74, would be retiring from his position at Janus Henderson to spend more time running his family foundation and managing his personal assets.

Bill Gross was the original Bond King, co-founding PIMCO in 1971 and practically inventing the total return approach to fixed income management that is so ubiquitous today. In the star manager era of the 80’s and 90’s, Bill was perhaps the only household name that wasn’t a stock picker. For forty plus years, and throughout many economic and market cycles, he successfully managed hundreds of billions of dollars on behalf of millions of institutional and individual investors. Under his watch and leadership, PIMCO grew into a world-class asset manager overseeing trillions of dollars in AUM.

I have several vivid memories related to Bill Gross in my career:

  • The PIMCO Investment Outlooks: The first market commentaries I ever read were Bill’s monthly missives. When I was in high school, interning for the summer at Huber Financial, I remember my dad handing me a copy and saying “read this.” I didn’t understand a word of what I was reading at the time, but I still found it interesting and entertaining. I learned a lot over the years from those quirky Outlooks.
  • Face to Face: One of the most memorable due diligence trips in my career was a visit to PIMCO’s offices for a wealth management forum. Bill joined one of the sessions for an informal Q&A with the attendees. As a twenty-something at the time, I just remember being in awe and thinking it was so cool to be sitting at the same table as this investing legend.
  • The Sunglasses Incident: In June of 2014, Bill had the financial media clutching their collective pearls when he…wait for it…wore a pair of sunglasses on stage for his keynote speech at the Morningstar conference! The horror!
  • Bill Gross to Janus”: An announcement so stunning that it became a Twitter meme. For me, it’s one of those moments like the O.J. verdict where I remember exactly where I was when I heard the news. My jaw dropped when I learned that Bill Gross was leaving the firm he founded and was synonymous with for decades. It was unfathomable at the time.
    Many others on Twitter were quick to share their memories and takes on Bill’s storied career.

Mohamed El-Erian, who was Co-CIO of PIMCO with Bill from 2007-2014, had this to say:


In keeping with the sports analogies, it might be fair to characterize the last few years as a Hail Mary of sorts, with Bill attempting to save face and prove that he still had “it” on the heels of his acrimonious ouster from the bond juggernaut that he was largely responsible for building. At times, it seemed that exacting revenge on PIMCO in the form of outperformance was his top priority. Gross himself stated to the New York Times in 2016, “My whole evening is dependent on whether I beat them,” he said. “You see, I have to prove it all over again. Every day.”

Unfortunately for Gross, the cold-dish of revenge was never served, as his fund significantly underperformed his ex, the PIMCO Total Return strategy. He also materially lagged PIMCO’s more comparable “unconstrained” bond fund.

While many predicted that the money would follow Bill over to Janus in droves, it never quite manifested. At it’s peak, the Janus Global Unconstrained Bond fund managed just over $2 Billion – a far cry from the near $300 Billion managed for the PIMCO Total Return mandate at its apex. With less than $1 Billion in the Janus fund today – much of it Bill’s personal riches – it’s safe to say that the original Bond Kind is going to exit stage left not with a bang, but with a whimper.

In an unrelated article this week, Morningstar’s John Rekenthaler wrote about an award winning paper from AQR that decomposed the historical “alpha” of legendary stock-picker Warren Buffett (Emphasis mine):

Of course, as the authors acknowledge, appreciating in 2018 the wisdom of leveraging to buy U.S. companies that have low stock market betas, high-quality businesses, and relatively cheap price multiples is quite different from appreciating that strategy half a century ago, when Buffett took control of Berkshire Hathaway. We can look back, in hindsight, and re-evaluate Buffett’s alphas as consisting of several betas. We could not do so at the time. We may now understand the magic, but only the magician could have created the trick.

A strong case can be made that Bill Gross was himself a magician, devising several fixed income tricks to put up his sleeve only to be “discovered” later. Like no one else before, Gross brought a level of enchantment to an otherwise boring asset class. One need not look any further than the April 2013 edition of his Investment Outlook for a glimpse at some of the “tricks” that are used widely today but that Gross in many ways pioneered:

On a somewhat technical basis, my/our firm’s tendency to sell volatility and earn ‘carry’ in a number of forms—outright through options and futures, in the
mortgage market via prepayment risk, and on the curve
via bullets and roll down as opposed to barbells with
substandard carry—has been rewarded over long periods
of time.

Bill has been a lightning rod throughout his career, drawing his fair share of both praise and criticism. Nobody lives a flawless life or has a flawless career. And Bill Gross is no different. But no one can dispute the impact he had on the investment industry. He changed the bond game forever and earned a permanent spot on the Mount Rushmore of fixed income investors.

So take a bow Mr. Gross, put those shades back on, and enjoy your retirement. You’ve created a legacy to be proud of, blemishes and all.

Additional Reading:

Bill Gross, Onetime Bond King, Retiring After Messy Last Act (The Wall Street Journal)

The ‘End of an Era.’ Bond King Bill Gross Is Retiring (Barron’s)

Examining Bill Gross’ Legacy (Morningstar)

Bill Gross Is a Cautionary Tale for Any Future Bond Kings (Bloomberg)

How the ‘bond king’ Bill Gross lost his crown (Financial Times)

Bill Gross’s Retirement From Janus Marks Sunset of Bond-Star Era (Bloomberg)

Once the ‘Bond King,’ Bill Gross Is Retiring, His Star Dimmed (New York Times)

‘The original bond king’: PMs and gatekeepers pay tribute to Gross (CityWire)

About the author

Phil Huber, CFA, CFP®

Phil is the Head of Portfolio Solutions for Cliffwater, a leading alternative investment adviser and fund manager. Prior to joining Cliffwater in 2024, Phil was the Chief Investment Officer for Savant Wealth Management, a multi-billion dollar wealth management firm. Phil has been involved in the financial services industry since 2007. He earned a bachelor’s degree in finance from the Kelley School of Business at Indiana University. He is a member of the CFA Society of Chicago. More about me here. Twitter: @bpsandpieces

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