Unstructured Finance

‘Bond King’ Gross speaks to 700 at Pimco client event in Big Apple

By Jennifer Ablan

Bill Gross did something last week he rarely does — venture from his Newport Beach, Calif. home to meet with investors twice. 

First in Chicago at the Morningstar Investment Conference where he made waves for donning sunglasses and joking he’d become “a 70-year-old version of Justin Bieber,” and then, the next day at a less-publicized event for 700 clients in New York City. 

The meetings are a sign that Gross, dubbed the market’s “Bond King,” is trying to make amends with investors and the media after a brutal first half of the year. 

Last Friday, Gross gave a keynote address and took some questions at Pimco’s annual investment summit in the Big Apple, which was the largest Pimco-hosted client event in its history with over 700 institutional investors and clients, Doug Hodge, ceo of Pacific Investment Management Co. told Reuters.
At Friday’s event, Hodge spoke reverentially about Gross, describing him in visionary language one might reserve for a great inventor or artist.
“Time after time, Bill has broken with conventional wisdom as he has seen opportunities where others have not, and he has been prepared to put it on the line, over and over again, and it has been this process of taking measured risk that has led to extraordinary long-term benefits to you, our clients,” Hodge said.
Gross is facing no shortage of investor attention.
Pimco’s flagship Total Return Fund, the world’s largest bond fund run by Gross with $229 billion in assets under management, saw net outflows totaling $15.67 billion for the year-to-date ending May and subpar performance.
Gross, co-founder of Newport Beach, California-based Pimco, has also been under intense scrutiny since his public falling out with El-Erian and news reports about Gross’s demanding and sometimes abrasive management style.
But for its part, Gross’s performance at his Pimco Total Return Fund is showing some signs of stabilization.
In the 12 months ending last Friday, the Pimco Total Return Fund, which has $229 billion in assets under management, is now beating its benchmark Barclays U.S. Aggregate Bond Index by 32 basis points, Hodge pointed out.
“At the end of the day, Pimco and Bill Gross should be judged by the value that we deliver to our clients. That’s the test,” Hodge told Reuters in an interview. “Through the Total Return Fund and other strategies, Bill has created more value for more investors than anyone in the history of our industry.”
The half-day summit on Friday featured Gross but also showcased Pimco’s new deputy chief investment officers and Rich Clarida, Pimco’s global strategic advisor.
After the client event, Gross also did a town hall meeting with employees in Pimco’s offices, which was also attended by several hundreds of personnel, a Pimco spokesman said. Pimco declined to comment on what Gross discussed at Friday’s client and employee events.
While many say Gross appears more engaged with colleagues, some institutional investors are still waiting for a turnaround in his performance.
The Pimco Total Return Fund’s three-year Sharpe ratio – a measure closely followed by pension funds, foundations and endowments — is hovering around 1.02. That is trailing the Barclays Aggregate at 1.24 and the average intermediate-term bond fund category at 1.26 (The higher a fund’s Sharpe ratio, the better a fund’s returns have been relative to the risk it has taken on).
Hodge added: “Generating alpha is more than simply buying and selling bonds, it is about breaking with conventional wisdom and ultimately about putting yourself on the line.”

UF Weekend reads – The PIMCO edition

Jenn Ablan likes to tell me that people are always writing about PIMCO and Bill Gross, the long reigning “king of bonds.” And when you think of it there’s a lot of truth to that assertion.

Gross’ mammoth $263 billion Total Return Fund gets endless coverage because–by its very size–it really is the bond market. It’s one reason why so much ink is spilled whenever the Total Return Fund has a month where investors pull more money out of the fund than put in.  And it’s why there’s so much analysis of what Gross & Co. are doing with Treasuries and mortgage-backed securities–and whether they are using lots of leverage and derivatives to boost exposures.

Then again, it’s hard to ignore Gross & Co. since the bond king and his co-partner and heir apparent, Mohamed El-Erian are on TV virtually everyday offering their views on just about anything doing with the economy.

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