Money manager titans who can’t wait until 2014

By Jennifer Ablan
November 11, 2013

The year can’t end fast enough for some of the world’s biggest investors.

Bill Gross, who many like to consider the King of Bonds, lost one of his prized titles last week when his PIMCO Total Return Fund was stripped of its status as the world’s largest mutual fund because of lagging performance and a swamp of investor redemptions.

The PIMCO Total Return Fund — somewhat of a benchmark for many bond fund managers — had outflows of $4.4 billion in October, marking the fund’s sixth straight month of investor withdrawals, and lowered its assets to $248 billion, according to Morningstar.

For the year, the PIMCO Total Return Fund has had outflows of about $33.2 billion. The Vanguard Total Stock Market Index now holds the title of world’s largest mutual fund with $251.1 billion.

Fears of rising interest rates once the Federal Reserve scales back its extraordinary stimulus have resulted in continued net cash outflows by investors and led to Gross’s fund being down 1.36 percent for the year — beating the industry benchmark but lagging behind many of the fund’s competitors.

After posting strong gains last year by betting big the Fed would buy mortgage debt as part of its easy monetary policies, reality is catching up this year to Gross and his fund.

This year is much more reminiscent of 2011, when Gross bet wrong on Treasuries and his giant fund had its first outflows in years. That year Gross apologized to investors with a mea culpa letter, saying “I’m just having a bad year”, and we followed up with our own analysis looking at the future of Gross and PIMCO in our story Twilight of the Bond King.

But Gross has company.

Ray Dalio, who runs the world’s largest hedge fund, the $120 billion Bridgewater Associates, is still feeling the pain from the rough May and June bond market sell-off. His All-Weather fund portfolio — which as its name implies was constructed to weather different market environments — was down 5.6 percent year-to-date through September even after posting a nice monthly return of 3 percentage points in September alone. The lagging performance of the All-Weather portfolio throws a big curveball into the so-called risk parity investment strategy that Dalio helped popularize and he and his staff have long preached about to pensions and other institutional investors.

Another big money investor who has suffered a bit is Jeffrey Gundlach, whose DoubleLine Total Return Bond Fund had $1.1 billion in October, marking its fifth straight month of outflows and bringing this year’s outflows to $3.1 billion. Gundlach has seen money come out even though he began on a high note by predicting a big rally in the Japanese stock market.

The outflows came as his fund rose 0.64 last month, ahead of just 14 percent of peers.

On the equity front, hedge funds with a short bias strategy — those that take a net short position in the market — have posted miserable returns. Through September, those funds were down more than 13 percent for the year, according to Hedge Fund Research. And a few short-dedicated shops have closed up business this year in the wake of the stock market’s continuing upward trajectory.

But maybe no big money manager is probably looking for the end of this year than multi-billionaire Steven A. Cohen. On the performance side, its been a solid year for his SAC Capital Advisors, up about 16 percent compared to the average 6 percent gain for the typical hedge fund. Yet on the investigation front, this is the year when the endless pursuit of federal authorities finally caught up with the man who has posted some of the best long-term returns in the hedge fund industry.

With his SAC Capital pleading guilty to securities fraud last week and agreeing to pay $1.2 billion in fines and forfeiture to settling a more than seven-year insider trading investigation, Cohen will be stripped of his status of a hedge fund manager. And while Cohen himself has not been charged by prosecutors with wrongdoing and will continue running some $9 billion as a family office, this year’s events have got to be a humbling one for him.

That’s because when the history books are written, there will now always be a good deal of doubt about just how Cohen earned his reputation as one of the greatest stock traders of his generation.

There you have it: A rough 2013 for some of the biggest names on Wall Street. Will 2014 be any better? At this year’s Reuters Global Investment Outlook Summit, which begins on Monday November 18, we will ask some big names on Wall Street for what they think will happen on the investment front.

I will be joined at the Summit in New York by Wall Street investigations editor Matt Goldstein, correspondents Katya Wachtel, Svea Herbst-Bayliss and Sam Forgione. And from our Times Square offices, we will press more than a dozen well-known money managers and economic policy experts on their views and outlook. Some of our guests will include Bonnie Baha, who works alongside Gundlach at DoubleLine; Avenue Capital’s Marc Lasry and his sister and co-partner Sonia Gardner; Loomis Sayles vice chairman Dan Fuss; hedge fund short seller Jim Chanos, among others, about the state of the global financial markets and world affairs today.

We will also be asking: How are they preparing for the end of the Federal Reserve’s quantitative easing? What are their best investment strategies going into 2014? And topics ranging from their thoughts on new Fed chair Janet Yellen to their views and opinions on increased income inequality.

If there’s anything you want to know about, let me know on Twitter @jennablan

And for a look back at last year’s Investment Summit, here are some of the major videos with guest and stories we did.

 

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