An article in Bloomberg by columnist Nir Kaissar offers insights on the career of “hall-of-fame” bond manager Bill Gross, who announced his retirement earlier this year after what the press hailed as a “messy last act” as manager of the Janus Henderson Global Unconstrained Bond Fund (since 2014).”
“Gross made some big bets at Janus Henderson that didn’t pay off,” writes Kaissar, who adds that even though things didn’t go the way the manager would have liked, he was “right to bet boldly on his best ideas, and active bond managers would be wise to follow his example.”
Gross spent much of his career “perfecting the ‘total return’ approach to bond investing with the Pimco Total Return Fund he founded in 1987,” trying to outpace the broad bond market with more risky investments in lower-quality bonds. Kaissar writes, “No one did it better than the Bond King.”
Kaissar argues that while Gross’s “run at Janus Henderson wasn’t the unmitigated disaster implied by the headlines,” he “failed to re-create the market-beating magic of his Pimco days:”
Gross’s high-stakes unconstrained strategy wouldn’t have generated such negative noise, Kaissar asserts, had the bets paid off. He argues, however, that “investors no longer need a bond manager to tinker around the edges of the bond market,” adding “to the extent that investors need a bond manager, it’s to make the kind of unconstrained calls that Gross made at Janus Henderson, knowing full well that those calls could be a bust just as easily as a boon. You can’t get that from an index.”
In the wake of his retirement, Kaissar concludes, Gross leaves a valuable lesson for “aspiring bond kings: “Take more risk, not less.”
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