Notes From the Fieldby Martin Weil

Posts Tagged ‘mutual funds’

December 3, 2014

Autopsy of Bill Gross’ Departure from PIMCO

Bloomberg printed a very well-researched article yesterday on the sequence of events that led to September’s surprising departure of “bond king” Bill Gross from the Newport Beach firm he founded.

To anyone who paid close attention, there had been trouble brewing at PIMCO for some time, evidenced by the sudden departure earlier this year of co-CIO Mohamed El-Erian. My own concerns date back to 2010. As an investor whose client accounts were heavily allocated at the time to funds under Gross’s management, I grew concerned by the ballooning of Total Return’s assets and the increasing use of derivatives in PIMCO’s flagship fund. PIMCO’s decision that year to enter the equity business, having been a bond-focused shop since its start, raised yet more red flags for me. And then, performance at Total Return started to lag. As I wrote in this 2011 article for Advisor Perspectives,┬áthe under-performance did not appear to be a blip but more likely indicative of the larger systemic problems that had been building over time. We steadily reduced our allocations to PIMCO’s Total Return from a peak of more more than 10% of assets under management in 2009 to less than 3% by the start of 2014.

Bill Gross demonstrated for more than two decades that he is one of the most astute managers of fixed income on the planet. It will be interesting to watch whether he can rediscover his “mojo” at Janus. Given the advantages available when investing with a very small start-up asset base, it would not surprise me to see Gross score big right out of the gate. What is less certain, as assets under management start to grow again, is whether Gross can routinely add “alpha” over the benchmark as he once did. The odds of this, judging from the records of other “star” managers who lost their footings and attempted to start over, is not encouraging.

May 27, 2014

Has PIMCO Found its Savior?

Paul McCulley (I have always wanted a legitimate reason to use this picture) former economist at PIMCO who left in 2010, returns in a similar role, the firm announced today.

Business Insider says:

McCulley is one of the smartest, most interesting thinkers around. And his departure form PIMCO in 2010 has been associated by some to a dropoff in the firms’s performance and understanding of the economy.

I feared as much at the time. One of PIMCO’s greatest strength has been its unparalleled understanding of the credit cycle and the particular impact of the Federal Reserve. With McCulley’s return, one hopes the Newport Beach firm has taken a major step towards restoring this core competency.


Here is McCulley from his PIMCO days. The question I want to ask is whether PIMCO (like the Yankees in baseball) will insist he lose the hair if he is to take up residence again in Orange County.





October 25, 2011

PIMCO Total Return – I have questions

It is not often that I get published elsewhere online but Advisor Perspectives (a resource for professionals in the field) has published this article of mine on the recent performance stumble by Bill Gross at PIMCO Total Return.

June 13, 2011

How to care for your investors

I note the following from Morningstar Advisor’s website:

At this May’s annual meeting for LongLeaf Partners funds, Mason Hawkins, CEO of advisor Southeastern Asset Management, stated that the six independent trustees of the funds (plus another who’s classified as an “interested” trustee because she does some operational and administrative work for the funds, though she is not otherwise affiliated with Southeastern) collectively have $19.4 million invested in the three Longleaf funds.

I have always been a fan of Longleaf (and use them in my investment portfolios) for their investment acumen, highly disciplined approach and shareholder-oriented culture. Unlike the managers at most funds, Longleaf’s managers have a majority of their investment wealth in the funds they oversee. This latest disclosure is a further indication of how everyone involved in decision-making at Longleaf also has financial interests that are aligned with their shareholders. Longleaf sets a very high bar for shareholder values, one that most other fund companies do not even come close to approaching.

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