When bond king crown is taken away

If you are an investment professional, you should know who is the world’s Bond King; or rather was. Bill Gross, the guy who co-founded PIMCO, the largest global fixed income investment company with almost $2 trillion AUM. Once upon a time, he is the go-to person when it comes to fixed income, people take his views seriously – a market mover that is. He was able to consistently outperform the market and his peers. I quote an article from Market Watch, PIMCO data shows that his fund outperformed its benchmark, the Barclays Aggregate Bond Index, by a wide margin from its launch in 1987 through the late 2000s. Onvestors in his fund were “$47 billion wealthier for the decade”. Fresh graduates back then sought after him to learn how he succeeded in the financial markets, how they too can build a career like him.

Here’s a snapshot of his performance up to 2014. From 1997 to 2014, the fund he managed had only 2 years of negative return.

Bill gross

But that was only up to 2014.

I was very surprised myself that in Sep 2014, he was ousted from PIMCO, the company that he himself founded back in 1971. That was brutal. And then all the bad stories came out – he has a volatile temper, never respects his peers/colleagues. Some even said he was the reason why El-Erian, his right hand man, left PIMCO. He led the company to become a dysfunctional one. Who would have thought?

And since then his career is like what we say in Malay “sudah jatuh ditimpa tangga”. He joined Janus Henderson (previously known as Janus Capital Group), another asset management company but about 4 times smaller AUM than PIMCO (~USD371bn as at Dec 2017). According to Morningstar, if you put in USD10,000 end Sep 2014, you would now have USD10,224 only as opposed to the broader US bond market which would yield USD10,972. So you might as well invest in the market than asking Bill Gross to manage your money.

Here’s a snapshot of the performance of the fund he managed.

bill gross 2

From a peak of USD2.2bn, it came down to under USD1bn as of last year, which most of it was his own money. Investors lost faith and left. Bill Gross has lost his crown. He became the most storied career in financial markets.

Early of this year, he announced his resignation and last week was his last day. He revealed more surprises during his interview with Bloomberg. I’m trying to look for the full interview but couldn’t (you can read the summary of the interview here). He announced that he has Asperger’s syndrome, the autism-spectrum disorder. Apparently he had this all this while but only realized it recently. But the point is that, he claims that was the reason why he could be a successful investor AND the reason why he behaved such way with people. People with that syndrome, according to him “can operate in different universes without the other universes affecting them as much”.

I have always liked to understand the process of how a person becomes successful and failure too, which is why I was intrigued by the ups and downs of Bill Gross’s career. My key takeaway from this is that, confirming further my hypothesis, one should not just have 1 leader that you look up to. I was lucky enough to sit in a meeting with senior management on a monthly basis for good 7 years. Every leader has his/her own strengths and weaknesses, with a varying degree of course, the really good ones, you can almost be blinded by their weaknesses. But my point is, learn from all these leaders. Take the positive traits but also be aware of the negative traits.

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