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Bill Gross retires after storied four-decade career in bonds

Bill Gross retires after storied four-decade career in bonds
Bill Gross' annualized returns of less than 1% at Janus failed to live up to his stellar long-term record from the Pimco era. (Janus Capital)

Bill Gross, who reigned for decades as the bond king at Pacific Investment Management Co., is retiring four years after jumping to Janus Henderson Group from the fixed-income giant he co-founded.

“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,” Gross said in a statement Monday. “So many friends and associates at my two firms to thank — nothing is possible without a team working together with a common interest.”

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Gross, 74, has run the Janus Henderson Global Unconstrained Bond Fund since late 2014, shortly after he suddenly left Newport Beach-based Pimco in the midst of a management clash. His annualized returns of less than 1% at Janus failed to live up to his stellar long-term record from the Pimco era.

Gross said the decision to retire was his own. “It’s been almost a half a century of watching screens and waking up in the middle of the night to check Asia and Europe,” he said in a Bloomberg Television interview Monday. “I’ve got a few Super Bowl rings, and it’s time now to enjoy myself and my family.”

Responsibilities for the unconstrained bond fund and related strategies will be assumed by the team at Janus that has been supporting Gross for four years, according to the statement. Nick Maroutsos, co-head of global bonds, will become the portfolio manager of the fund as of Feb. 15.

The billionaire money manager started his latest chapter with fanfare. Janus Chief Executive Dick Weil compared him to Super Bowl-winning quarterback Peyton Manning — “that game-changing level of talent.” Gross poured $700 million of his personal fortune into the unconstrained fund, but he failed to attract much outside money, and Gross’ performance relative to peers deteriorated each year.

The go-anywhere fund lost almost 4% 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. Gross, who in September 2018 reduced his own stake in the fund, had blamed losses during the year’s first half partly on a misplaced bet that rates on U.S. Treasuries and German bunds 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,” Weil, whose firm is now based in London, said in an interview in August.

In the statement Monday, Weil said: “Bill is one of the greatest investors of all time and it has been my honor to work alongside him. I want to personally thank him for his contributions to the firm.”

Less time to prove himself

When 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,” 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.”

Gross’ 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, with a much smaller supporting cast. His only co-manager, Kumar Palghat, left the fund after a year.

At Pimco, Gross 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% from inception through his last day.

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

Fixed-income whiz

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.

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As Gross’ 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 Gross’ record as a fixed-income whiz, a feat aided by a 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.

Obsessive drive

Gross drove himself obsessively. A former devoted long-distance runner, he once raced from San Francisco to Carmel, then was hospitalized 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 Gross and colleagues. In early 2014, Pimco chief Mohamed El-Erian quit.

Gross sought to weed out managers he suspected of disloyalty, spurring executives at Pimco’s parent, German insurer Allianz, to intervene. Gross eventually jumped ship before he could be thrown overboard. On Sept. 26, 2014, he left a handwritten note announcing his resignation as of 6:29 a.m. Pacific time — one minute before New York markets opened.

Investors withdrew hundreds of billions of dollars. Little of that followed Gross to Janus Capital, as the firm was known before its 2017 merger with Henderson Group.

Gross will continue to manage his personal assets and intends to remain active in charitable endeavors, according to the statement. He has made philanthropic donations of $800 million in the last 20 years.

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“I’m off,” Gross said, “leaving this port for another destination with high hopes, sunny skies and smooth seas.”

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