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Legendary bond investor William H. Gross is leaving Pacific Investment Management Co., the company he helped found in 1971, to run a new fund at Janus Capital.
Mr. Gross made the announcement this morning, sending shares in PIMCO’s parent Allianz down almost 6.0% dragging the entire DAX down with it (they’re the 7th biggest component). The DAX is down 0.6% since the Bill Gross news hit.
The news has come as a bit of shock despite coming just two days after it was revealed that the SEC is investigating whether or not PIMCO inflated returns on its ETF. Gross, a prolific tweeter, offered little indication that he was planning on leaving. In January, following the departure of then-CEO Mohamed El-Erian, Gross said, “PIMCO’s fully engaged. Batteries 110% charged. I’m ready to go for another 40 years!”
There is of course speculation that Gross jumped before he was pushed, the SEC investigation has come on the back of a string of bad press for Gross, who has been fighting fires at the bond firm for most of the past twelve months.
Allegations of poor man management skills and clashes with his executive team have overshadowed the bond funds performance of late. So Gross’s departure was perhaps inevitable.
The hunt is now on for his successor, with current deputy chief investment officer Dan Ivascyn being tipped for the hot seat.
As for Gross, he is likely to relish a fresh challenge, his move to Janus offers a clean slate allowing him to concentrate on what he does best. Manage bond funds.
Gross’s new fund will be the recently-launched Janus Unconstrained Bond Fund which Gross will run from a new Janus office in Newport Beach, California. Gross will also be responsible for building-out the firm’s efforts in global macro fixed income strategies.
I for one would like to wish Gross all the best in his new endeavour. Gross is a legend amongst investors, he should be remembered for his investment prowess and not for his people skills or lack thereof.
Here’s Gross’s statement in full.
For most of my career, I have been privileged to be associated with one of the most successful investment management firms ever — Pacific Investment Management Company (PIMCO). Today, with a mixture of excitement and sadness, I am announcing that I have decided to join Janus Capital Group and end my association with PIMCO. It was not without great thought and deliberation over quite some time that I decided to begin this next chapter. During my time at PIMCO we accomplished a great deal, managing now over 2 trillion dollars of global assets with a track record of very significant value added that has generated tens of billions of dollars to individual, corporate, and sovereign client portfolios. But now, after having spent considerable time serving in senior management, it is a time for me to reduce executive and people management responsibilities at a larger firm and focus on the pure aspects of portfolio management at a smaller one. Janus is the right fit at the right time in my career – and my life.
I am honored to be welcomed by Janus Capital Group, which is headed by former PIMCO managing director/COO Dick Weil. At Janus, in a new Newport Beach office, a simpler yet still intense career lies ahead of me to be able to assist individuals and other investors in their needs for above market returns in an increasingly risky market environment. In particular, I greatly respect the fixed income investment philosophy of Janus, which is consistent with my belief: value added consistent with the protection of principal.
I have been fortunate to have had a great run at PIMCO, and I am looking forward to be able to continue this run with Janus.
I sincerely wish all of my friends and associates at PIMCO much future success. It has been an honor to have worked at PIMCO these many years.
Todays Other Top Stories
Bloomberg: – Real estate munis coveted in riskless return chase. – Debt backed by real estate is the best-performing part of the $3.7 trillion municipal market this year when factoring in price swings as housing foreclosures ebb.
The Bond Buyer: – Muni managers stick with defensive posture as rates stay low. – Municipal managers say they’re continuing to shield their clients’ assets from higher interest rates, even though some are skeptical that a spike is imminent almost six-years after the Federal Reserve cut its target to near zero.
WSJ: – Why Silicon Valley loves muni bonds. – (Subscription required) Richard Morais has a preview of the new (glossy!) edition of Penta, with stories on how tech entrepreneurs are investing and the hidden dangers of buying a hotel apartment.
Businessweek: – Bond traders are fading away. – The size of the bond market in the U.S. ballooned to $37.8 trillion at the end of 2013, up $5.1 trillion since 2008, as issuers took advantage of low interest rates to raise money. Even so, trading in dollar-denominated bonds declined 22 percent to a daily average of $809 billion, according to data from the Securities Industry & Financial Markets Association.
FT: – Bill Gross’s exit from Pimco rattles global debt markets. – News of Bill Gross’s departure from Pimco rattled global debt markets on Friday on speculation leadership changes at the world’s biggest manager of bond funds may prompt a move away from US Treasuries and emerging market debt.
Andrew Sachais: – Why you should consider selling your TIPS holdings. – Expectations for the Federal Reserve to raise short term rates next summer have pushed Treasury yields higher. Similarly, U.S. consumer prices remain muted. These two developments have weighed on inflation expectations, pushing inflation-protected securities lower.
WSJ: – U.S. Government bonds selling off on news of Gross joining Janus. – Investors sold Treasury bonds on Friday as news that Bill Gross, one of the biggest names in fixed-income investing, is leaving Pacific Investment Management Co.
High Yield Bonds
MarketWatch: – Get ready to ride the junk-bond roller coaster. – The market for junk bonds is turning dour again, just weeks after recovering from its most recent selloff. There are signs high-yield investors , who piled into the asset class in the years since the Great Recession gripped the market, are in for a bumpy ride.
S&P Capital IQ: – High yield bond funds see $528M cash inflow. – Retail-cash flow turned positive for U.S. high-yield funds in the week ended Sept. 24, with a net inflow of $528 million, marking the first positive reading in four weeks. However, take note that the sum represents greater inflow to ETFs of $584 million dented by an outflow of $55 million from mutual funds, according to Lipper.
Gary Gordon: – When canaries stop singing, riskier ETFs can croak. – With four of the “classic canaries” unable to make a peep, with foreign developed markets as well as mid-caps barely making an audible sound, how much longer will large-caps rally without a meaningful 10% correction?
MarketWatch: – Dallas Fed’s Fisher: Signs of extreme risk-taking in junk bonds. – The market for debt sold by the lowest-rated companies is concerning, said Dallas Federal Reserve President Richard Fisher on Thursday. Fisher suggested at a conference in Rome that the Fed’s low-rate policies helped push up asset prices like those in the market for junk bonds, according to news reports. “We’re beginning to see extreme risk taking in the junk bond markets,” Fisher said.
Income Investing: – ‘Benign’ conditions continue in bond world. – Junk bonds have been popular for some time, although some see signs of the market flagging. In this vein, Fitch Ratings released a report tackling the reason why investment-grade and junk bond yields and spreads are so low.
Income Investing: – Seabreeze: Was Pimco the big seller in junk bonds? – Seabreeze Partners Management’s Doug Kass has an interesting blurb out this morning, noting that high-yield bonds have had a rough week, perhaps precipitating stocks’ big slide yesterday. This morning, Kass speculates that Bill Gross’s departure from Pimco to Janus Capital might shed some light on the declines earlier this week, “as, perhaps, Pimco has been liquidating some portfolio positions.”
CNBC: – Here’s what’s behind the high-yield bond crisis. – You don’t have to be an investment genius to realize that valuations have been stretched by the desperate “reach for yield.”
InvestorPlace: – Heed the warning signs from high-yield bonds. – High-yield bonds can be indicative of what’s to come for stock markets.
Emerging Markets Daily: – Could Argentina bonds rally after Friday hearing? – A U.S. judge has ordered Argentina to show in court Friday afternoon why it is not in contempt for violating orders favoring bond holders — especially U.S. hedge funds — that refused to accept terms on restructured bonds.
Income Investing: – Barclays still constructive on EM debt. – With some investors growing wary of high-yield debt in the U.S., there is a concern that that could spill over into emerging market bonds, given worries about valuation, foreign exchange, and liquidity conditions.However, Barclays’ Andreas Kolbe, Aziz Sunderji, and Donato Guarino aren’t convinced that emerging market debt is overpriced.
Reuters: – Willis Group places $250 mln California catastrophe-bond. – Willis Capital Markets & Advisory (WCMA), part of Willis Group Holdings said on Friday it had structured and placed a $250 million catastrophe bond deal with California’s largest provider of workplace insurance.
Bloomberg: – Pimco could see withdrawals up to 30% as managers stunned. – Pacific Investment Management Co. may see asset withdrawals of as much as 30 percent after the surprise departure of Bill Gross, a legend in the bond world who became a familiar face to Main Street investors as they poured money into the firm’s funds through retirement plans.
Zacks: – Capture the housing uptick with these 5 mortgage-backed mutual funds. – Overall, the levels of negative homeowner’s equity has been on the decline since the beginning of the year. Essentially, people’s homes are now worth more than they owe in greater percentages than in the beginning of 2014.
Fortune: – Bill Gross really knows how to manage an ETF. – High-profile mutual fund founder has had big returns with his exchange traded bond fund. Is he just good? Or did he cheat?
ETF.com: – With Gross along, will Janus now enter ETFs? – With Bill Gross departing PIMCO for Janus, the ETF industry is abuzz with questions. Who will manage the PIMCO Total Return ETF (BOND | B)? What will happen with PIMCO’s ETF assets? And most intriguingly, does this mean Janus will enter the ETF space? The answer to the latter question is probably no, at least not immediately.
Reuters: – Gross’ sudden Pimco exit may quicken outflows to rivals. – Bill Gross, who built Pimco into a $2 trillion asset manager and became one of the world’s best-known bond investors, quit the firm he co-founded on Friday after his flagship fund suffered its 16th straight month of outflows and amid a Securities and Exchange Commission probe into whether one of his funds artificially inflated returns.
Between the blown macro calls, the MEE situation, fund outflows & now regulatory scrutiny, a separation is probably best for PIMCO & Gross
— David Schawel (@DavidSchawel) September 26, 2014
Bond market bull switches firms causes bond crash.
— Colin Cody (@ColinACody) September 26, 2014
More from my Exclusive Interview–Gundlach says he and Gross met last week at Gundlach’s house and Gundlach says “we had a lot in common”
— Jennifer Ablan (@jennablan) September 26, 2014