Published On: Fri, Jan 2nd, 2015

How Did Bill Gross’ Departure Affect Pimco in 2014?

Bill Gross janus


Pimco’s largest mutual fund, the Total Return Fund, managed by Scott Mather, Mark Kiesel and Mihir Worah after the sudden leave taking of the fund’s manager Bill Gross in September, had a lackluster 2014, but what did Bill Gross departure have to do with it? The fund returned 4.7% for the year, way behind 53% of similar funds. However, this might have had nothing to do with Gross leaving. First of all, Gross parted ways with Pimco pretty  late in the year, and the fund gave an even worse performance in 2o13, losing 1.9% behind 65% of comparable funds, as reported by Bloomberg.

True, there was a mass exodus of holders after Bill Gross left, but redemptions were happening as far back as May. Amid these redemptions, Gross sounded confident the fund would rebound by the end of the year. That failed to happen, and it probably was not because of Gross leaving Pimco. One reason might have been that investors were disappointed by how slowly the Federal Reserve is increasing rates. In addition, low oil prices are quashing hopes of inflation. The continued strength of stocks is also causing investors to prefer this investment vehicle to bonds.

Mather, Kiesel and Worah, however, wrote an optimistic-sounding letter in November, saying they continue to hold TIPS bond fund and that “policymakers will ultimately be successful in raising inflation expectations.”

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