Bill Gross, former co-chief investment officer of Pacific Investment Management Co. (PIMCO), pauses following an alumni event hosted by UCLA Anderson School of Management in Beverly Hills, California, U.S. (Photographer: Andrew Harrer/Bloomberg)

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

(Bloomberg) -- Bill Gross isn’t just retiring from money management. He’s marking the twilight of an era.

Gross, 74, announced 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’s recent struggles show how hard it’s become for individual managers to beat the indexes, 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.”

Influence Wielded

Influential individuals such as Jeffrey Gundlach of DoubleLine Capital remain, but in his prime, at Pacific Investment Management Co., 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.

At Pimco’s predecessor, Pacific Mutual Life Insurance Co., which he joined in 1971, Gross was a pioneer in trading bonds not to buy and hold, but to deal in pursuit of accumulating returns.

“The total return style of investing was very unusual and it was almost like the market came around to the way he did things,” said Morningstar Inc.’s Eric Jacobson.

New Beginning

Gross’s 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’s 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.

Gross’s Newsletters

Gross built a following through newsletters, starting in the 1980s when he wrote a note about Butler Creek, his Ohio boyhood playground. His monthly commentaries drew from a range of inspirations -- cartoon characters like Wile E. Coyote, his son’s artificial insemination and his cat Bob.

He issued his final note last March, entitled “Killing Each Other,” using inhumanity as a metaphor to warn investors about market risks. The letter came out a few weeks before his unconstrained fund suffered a one-day 3 percent loss on a misplaced bet that rates would converge between German and U.S. bond yields.

Gross 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.

Rate Bet

Gross conceded last year’s outsized rate bet violated the investing model he pioneered at Pimco.

“The Total Return concept I developed was developed on the concept of measured risk-taking,” he said Monday on Bloomberg TV. “It’s what I learned in the days of blackjack. You didn’t put a lot on the table.”

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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