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Bill Gross vs Pimco Funds: The Bond King’s Crown Is Tarnished

When Bill Gross resigned from Pimco five months ago, he likely envisioned a mass exodus of his formerly-managed Pimco funds, hoping that significant assets would flow into the fund he would manage at his new employer, Janus Capital Group Inc (NYSE:JNS).

Bill GrossGross, along with many financial media pundits, also imagined Pimco floundering amidst the challenge of outflows in the wake of his exit, while he enjoyed early success in building a new bond fund at Janus with his inflows.

Although the story has followed some of these lines, it has not gone completely according to script.

Pimco’s flagship fund, Pimco Total Return (MUTF:PTTRX) has seen excessive outflows, totaling more than $90 billion — including $12.5 billion in January — since Bill Gross’ departure.

Meanwhile, his new bond fund, Janus Global Unconstrained (MUTF:JUCAX) has accumulated more than $1 billion, including $86 million of inflows in January and $700 million of Gross’ own money to the fund, since he took over JUCAX last October.

But the part of the story that hasn’t gone quite as expected (or hoped for) in 2015 is the performance.

PTTRX vs JUCAX Performance in 2015

PTTRX, the fund that Bill Gross built and the fund that would become synonymous with his bond king reign, has lost billions in assets since his exit, but the performance has held up impressively.

In January PTTRX had a gain of 2.6%, which was ahead of 97% of all intermediate-term bond funds. The year-to-date performance of 1.6% is slightly lower but the performance is still ahead of 90% of category peers and the primary bond fund benchmark, the Barclays Aggregate Bond Index, which is up 0.8% thus far in 2015.

Bill Gross’ 2015 story is nearly the opposite at Janus funds. JUCAX had a January performance of 0.25%, which was just around median at a 47th percentile rank for the non-traditional bond fund category. The year-to-date return of 0.02% is behind 91% of the fund’s category peers and far behind that of PTTRX and the bond benchmark he had outperformed so many times in the past.

Can the Former Bond King Reclaim His Throne?

The narrative that Bill Gross wanted to follow, the one where he was the misunderstood genius that was spread too thin at the giant Pimco and would be able to regain his market mojo at a smaller fund shop at Janus, has not played out thus far.

The notoriety and brand of Bill Gross the bond king was enough to hold the attention and assets of investors at Pimco through some significant blunders, such as his betting against treasuries in 2011 and his proclamation of the “death of equities” in 2012.

With the transition to Janus Capital in 2014, investors and market observers seemed to go along with the narrative of a stumbling bond king that would regain his balance and reclaim his thrown. All he would need is the right environment.

But with his old flagship fund, Pimco Total Return, returning to the spotlight and his new Janus Unconstrained looking a bit constrained, Bill Gross’ old crown is looking increasingly tarnished and what might have been a minor stumble could turn into a complete fall if Gross doesn’t find his balance soon.

As of this writing, Kent Thune did not hold a position in any of the aforementioned securities. Under no circumstances does this information represent a recommendation to buy or sell securities.

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