Financial advisors and the investment community were shocked this past Friday when Bill Gross, sometimes referred to as "the bond king" resigned from Pimco, a firm he founded in 1971 that rose to become one of the largest mutual fund management firms in the world. Gross also served as fund manager for the $221.6 billion Pimco Total Return fund, and made frequent television appearances.
Although the move was surprising, it was not hard to find reasons for the departure. The Total Return Fund had seen investor redemptions totaling $68 billion in the past 16 months, and more recently, Gross has been under investigation by the Securities and Exchange Commission on a charge that an exchange-traded fund he was managing had illegally inflated its performance numbers. Prior to that, Gross publicly feuded with the man regarded as his successor, Mohammed El Erian, who had become a public face of Pimco with his book outlining a "New Normal" in the investment landscape.
Gross has taken a new position at Janus Capital Group, where he will manage a new fund called Janus Global Unconstrained Bond Fund in a new Janus office to be opened near his home in Newport Beach, CA. Some have speculated that investors will pull more money out of the Total Return Fund and follow Gross over to the new fund, where Gross will have the total control that he sought, and was denied, in his later years at Pimco.
Meanwhile, Pimco seems to be in good hands, with Gross succeeded by Daniel J. Ivascyn, formerly deputy chief investment officer. The Total Return Fund will be managed by longtime Gross associates Mark Kiesel, Scott Mather and Mihir Worah.
What are we to make of all this? Today's mutual funds are typically managed under a team approach. Gross was a throwback to an era when one manager would call all the shots and be rewarded (or not) according to whether his performance exceeded the market. Over time, it became obvious that he was impatient with consensus decision-making, which simply means he was out of step with modern fund management styles. It will be interesting to see if he is able to reproduce his (generally excellent) long-term track record in a more competitive market, particularly during this time period when the bond market has been dependent on Federal Reserve stimulus, which is winding down going into next year. Many advisors benefited from Gross's investment talents, but some are also undoubtedly happy to see Pimco Total Return managed in a more collaborative atmosphere.
Sources:
http://www.investmentnews.com/article/20140926/FREE/140929923/little-known-insider-ivascyn-takes-investment-helm-at-challenged?utm_source=BreakingNews-20140926&utm_medium=in-newsletter&utm_campaign=investmentnews&utm_term=text
http://dealbook.nytimes.com/2014/09/26/william-gross-leaves-pimco-to-join-janus/?_php=true&_type=blogs&_r=0
Sincerely,
Bill Morrissey, CFP® and Tammy Prouty, CFP®
Sound Financial Planning, Inc.
Primary Office
425 Commercial St., Ste 203
Mount Vernon, WA 98273
Phone: (360) 336-6527
info@soundfinancialplanning.net
soundfinancialplanning.net
Secondary Office
650 Mullis St., Ste 101
Friday Harbor, WA 98250
(360) 378-3022
PLEASE READ THIS WARNING: All e-mail sent to or from this address will be received or otherwise recorded by the Sound Financial Planning, Inc. corporate e-mail system and is subject to archival, monitoring and/or review, by and/or disclosure to, someone other than the recipient. This message is intended only for the use of the person(s) ("intended recipient") to whom it is addressed. It may contain information that is privileged and confidential. If you are not the intended recipient, please contact the sender as soon as possible and delete the message without reading it or making a copy. Any dissemination, distribution, copying, or other use of this message or any of its content by any person other than the intended recipient is strictly prohibited. Sound Financial Planning, Inc. has taken precautions to screen this message for viruses, but we cannot guarantee that it is virus free nor are we responsible for any damage that may be caused by this message. Sound Financial Planning, Inc. only transacts business in states where it is properly registered or notice filed, or excluded or exempted from registration requirements. Follow-up and individualized responses that involve either the effecting or attempting to effect transactions in securities or the rendering of personalized investment advice for compensation, as the case may be, will not be made absent compliance with state investment adviser and investment adviser representative registration requirements, or an applicable exemption or exclusion. This information should not be construed as investment advice. All information is believed to be from reliable sources; however, we make no representation as to its completeness or accuracy. WE WOULD LIKE TO CREDIT THIS ARTICLE'S CONTENT TO BOB VERES.
