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Bill Gross down, but not out, after Pimco tops him

Pras Subramanian

For years he was called the Bond King, but is his reign effectively finished? One year after the legendary Bill Gross left Pimco, the FT reports his new fund at Janus Capital (JNS) had a 2.5% loss, while during the same period Gross’s old flagship fund, Pimco’s Total Return Fund, was up 1.7%.

In the days that followed Bill Gross’s exit, many believed Pimco would not be able to sustain the loss of its founder. But the results show the system in place at Pimco, perhaps the one even built by Gross himself, is up to the challenge.

“Well it sort of suggests that at least [Pimco’s system] was not broken, the system was not compromised, not just by the absence of Bill Gross but by the massive outflows of investor funds from their products,” Yahoo Finance’s Mike Santoli says in the attached video. “That was what was considered to be the big danger was that Pimco Total Return and other funds that Gross oversaw in a broader way would basically not be able to operate well if they were having to hemorrhage money and give investor cash back.”

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Santoli says Pimco’s performance during this year on its own raises the old adage, “does the man make the office or does the office make the man.” Pimco relied upon a deep bench of executives and traders, it is “a huge institution that basically has a lot of intellectual property and trading prowess that [it] could fall back on.”

While Pimco can tout its strong bench of executives, the fact remains $120 billion flowed out of Pimco after Gross’s departure. Santoli says this isn’t just because Gross decided to take his ball and play somewhere else. The situation looked unstable from the outside for financial advisors, and this provided a catalyst for pulling money out of Pimco, but there were other factors at play. “[Pimco’s Total Return Fund] was over-owned, basically Gross had this cult of personality that had a tremendous market share in his funds,” Santoli says, so it was the perfect time for advisors pull some money out of the behemoth fund.

Santoli expected the bulk of the outflows from PIMCO wouldn’t end up at Janus, although he was surprised that only a billion dollars followed Gross to his new home. That being said, he cautions against taking one year's results and claiming it makes or breaks either PIMCO, or Gross at Janus. “It's not as if Gross went over and and blew up his new investors, he says. “Down 2.5% in a relatively tough to navigate market is not a disaster.”

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