After Bill Gross, founder of the largest bond fund in the world, left Pimco, investors left with him, and the ones who were hanging on might have felt abandoned.
Bill Gross’ departure from the fund he helped establish, the Total Return Fund, signals the problem with one person representing a fund for long-term investors, especially those saving for retirement. Gross was seen as a safe bet, and his leaving Pimco shook the perception of stability. As a result, more companies are opting for team managed funds so the fund doesn’t rest on the shoulders of a single person.
Withdrawals from Pimco amounted to $150 in 2014, as reported by Reuters. After Bill Gross left for Janus Partners, he was replaced by a team of three portfolio managers, Scott Mather, Mark Kiesel and Mihir Worah, and since then, the fund has returned 3.63% better than 93% of its peers compared to its performance prior to Gross’ departure, when the fund returned 3.5% and trailed 77% of its peers. Major corporations, like Raytheon and WalMart, have their 401 (k) plans in the Total Return Fund.
Gross admitted to Bloomberg that his departure from Pimco was due to irreconcilable differences; “For some reason still unbeknownst to me, they didn’t think that was a good idea and they did fire me, ” Gross, who managed the world’s largest bond fund until his unexpected departure on Sept. 26 when he joined Janus Capital Group, told Bloomberg. “In the last few weeks, it blindsided me; I had no idea that an executive committee could fire a founder and the titular leader of the company.”
Gross had suspected a few Pimco money managers of leaking information to the press. Gross had a feeling he was going to be fired, and pre-empted an embarrassing dismissal by finding a new position at Janus Capital.