Pimco’s ‘bond king’ joining rival Janus
Gross leaving firm he co-founded in 1971
NEW YORK – The biggest star in the bond market shocked the financial world Friday by leaving the huge money management firm he has led for four decades and joining a much smaller rival.
Bill Gross, who co-founded the investment giant Pimco in 1971 and runs its $222 billion Total Return Fund, said he would join Janus Capital Group. The prospect that investors would follow the guru-like fund manager and pull their money out of Pimco sent the stocks of several rival investment companies soaring.
Janus jumped 43 percent. Allianz, the German company that owns Pimco, dropped 6 percent.
“Many people invested in Pimco’s Total Return know Bill Gross, and they want his expertise,” said Todd Rosenbluth, director of fund research at S&P Capital IQ. “Money will leave Pimco. It’s just a question of how much.”
Gross has trounced rivals for years with deft moves in and out of bonds, earning the title “Bond King” and attracting hundreds of billions of dollars into Pacific Investment Management Co. But lately his performance has lagged that of many rivals and his management style has raised eyebrows.
Gross will develop bond investment strategies at Janus and run a recently launched fund called the Unconstrained Bond Fund from a new office in Newport Beach, California. He starts Monday at Janus, which is based in Denver.
Gross writes monthly commentaries on markets that are widely quoted, and his utterances on business TV shows can move markets.
But for all his star power, Pimco’s flagship Total Return hasn’t fared well recently. The fund lost 2.2 percent last year, according to Pimco, its first loss in more than a decade. It’s done better this year, returning 4.1 percent through August. Still, that is one point less than the average for similar bond funds.
A report from Bernstein Research estimated that Pimco could lose as much as 30 percent of the money in its funds as investors follow Gross to Janus, or put their money elsewhere.
In announcing Gross’ move, Pimco CEO Douglas Hodge alluded to tension between Gross and top managers. In the past year, “it became increasingly clear that the firm’s leadership and Bill have fundamental differences about how to take Pimco forward,” Hodge wrote.
For his part, Gross noted in a statement he was looking forward to not having to face “many of the complexities that go with managing a large, complicated organization.”