This past year for bond king Bill Gross has certainty been an interesting ride to say the least.
The year’s crazy events at Pacific Investment Management (Pimco) included everything from numerous weird interviews and commentaries as well as an SEC investigation into several key personnel changes, including one Pimco fund manager leaving to start a food truck.
Capping off that tumultuous and crazy year, Gross himself left for smaller rival Janus Capital Group, Inc. (JNS) amid a very publicized divorce with the firm he founded.
All of these issues have now left investors questioning whether or not the “Bond King” has the muster to really be effective in managing a portfolio. His offering at Janus has taken in some inflows, but is nowhere as huge as his former flagship $200 billion Pimco Total Return Fund (PTTRX).
Well, Bill Gross has received a huge vote of confidence from one billionaire investor: George Soros. With that in mind, regular retail investors may still want to consider Gross a leader for their portfolios.
Soros’ Bets Big
Bill Gross and Janus’ vote of confidence came in the form of a huge investment — namely a half a billion dollars from billionaire George Soros. According to a press release from Janus and a tweet from Gross, Soros Fund Management LLC — through its Quantum Partners LP hedge fund — will invest $500 million in a separate account run by the bond king.
Soros and his fund group apparently approached Gross within days of his announcement of leaving PIMCO to make an investment with JNS and the fund manager. According to sources, Soros Fund Management’s CIO Scott Bessent met with Gross and called him a legend in the investment management world.
The separate managed account will follow a global unconstrained approach to bond investing. Basically, Gross will have carte blanche to invest in any bond, from any country in the world as he sees fit — from long term U.S. treasuries to emerging market high yield debt.
Making such a large bet shouldn’t be taking lightly. Whether or not, you agree or disagree with his politics, Soros’ does know his way around the investment universe. Aside from famously “breaking the Bank of England” — in which he reportedly made a $1 billion in one day — his Soros Fund Management has been one of the most profitable firms in the hedge fund industry.
When people talk about hedge funds, they’re usually talking about outsized returns. Soros has been on the right side of the trade more often than not, making him one of the few to consistently achieve those returns: Since its founding in 1969, the fund has produced an average 20% annual return.
So, when someone like that makes a bet this big on a particular fund manager … well, it’s worth paying attention to.
Betting On Bill Gross & Janus
Here’s the important part: The strategy that Gross will employ for Soros’ separate account is exactly the same as his new Janus Global Unconstrained Bond Fund (JUCTX). You know, the one to available any retail investor with a brokerage account.
So the question now is whether or not regular retail investors should follow suit into Bill Gross and the JUCTX.
What’s interesting is that Soros and his team waited until Gross had left PIMCO to make the investment. As we’ve highlighted before, PIMCO’s ship maybe sinking. Despite their best efforts to provide ballast, investors continue to yank money from the investment group. More than $27 billion left the PIMCO Total Return fund in October alone, and many 401(k), pension plans and other institutional investors continue to flee.
Dealing with massive asset outflows and press continually beating down your door does not make for a quiet investing environment. Can PIMCO really be focusing much on returns with all the craziness going on at the investment shop? I’m not so sure.
Meanwhile at Janus, its star is on the rise, taking in more than $1.1 billion in new investor money. And no, that figure doesn’t include the new Gross-managed account for Soros.
Inflows aren’t necessarily a maker of investment performance, but they do matter as investors vote with their wallets. And it seems like they are voting in favor of Gross and his new home. The $500 million investment by Soros is a huge vote for the bond king and his unconstrained strategy. And while JUCTX is new and hasn’t really begun to get cooking, it could be a great satellite position for your portfolio.
At least one billionaire thinks so. And based on his track record, I would agree.
As of this writing, Aaron Levitt did not hold a position in any of the aforementioned securities.