Bill Gross fares worst among go-anywhere bond managers as stocks slide

His Janus Henderson fund fell 0.8% on Monday, the most in a year.

Feb 7, 2018 @ 1:07 pm

By Bloomberg News

Bill Gross was having a good 2018, until he wasn't.

Mr. Gross's $2.2 billion Janus Henderson Global Unconstrained Bond Fund fell 0.83% as markets plunged Monday — its biggest drop since Dec. 30, 2016, and the worst one-day performance in Morningstar Inc.'s nontraditional bond category among 64 funds with at least $20 million in assets. The swing reversed the fund's year-to-date total return to a loss of 0.4% from a gain of 0.4%.

His one-day loss pales against the 4.6% — and record 1,175-point — nosedive for the Dow Jones industrial average. Mr. Gross's fund regained about 0.1% on Tuesday while the Dow rallied.

Still, Monday's drop was a blow to Mr. Gross, 73, who last month pronounced the onset of a mild bond bear market and has touted his positive returns compared with more traditional fixed-income portfolios.

It's unclear why Mr. Gross's fund posted such a steep loss on Monday. The legendary money manager didn't reply to emails requesting comment. A Janus Henderson spokesman didn't immediately provide a comment.

Among possible causes:

Volatility spiked. As a source of higher returns, his fund relies on selling the equivalent of insurance against big market moves. "Higher volatility in markets present opportunity to earn higher returns by selling volatility not cash bonds," Mr. Gross said in a Tweet posted Monday. The catch is that sellers may need to pay claims to people who bought protection.

Duration, or interest-rate sensitivity, that Mr. Gross recently put at minus two years, meaning the fund is positioned to benefit from rising bond yields. Ten-year U.S. Treasuries fell almost 14 basis points on Monday, the largest decline since September. "As yields go up and bond prices go down, the fund makes money," he said in a Feb. 1 email. And vice versa, he could have added.

Holdings tied to currencies, commodities or other assets. When the fund's returns slid at the end of December, Mr. Gross attributed it in an email to "an unanticipated decline in the dollar, which led to a gold price increase. The fund was short gold at the time."

Mr. Gross's fund, which includes a sizable chunk of the billionaire's personal wealth, has returned an average of 2.2% annually over the last three years, ranking it in the bottom half of its Bloomberg and Morningstar peer groups. In 2010, he was named Morningstar's fixed-income manager of the decade for his work at Pacific Investment Management Co.

(More: The good and mostly bad of rising interest rates)

0
Comments

What do you think?

View comments

Recommended for you

Featured video

INTV

What's behind the TCA, ETrade deal?

Deputy editor Bob Hordt talks with senior columnist Jeff Benjamin about what each party in the recent acquisition stands to gain by joining forces.

Latest news & opinion

What's in a name? For TCA by ETrade, everything

Trust Company of America is gone, and there's big buzz over the name change. But turning the custodian into an industry powerhouse will take a lot longer — if it happens at all.

When it comes to regulating AI in financial services, murky waters are ahead

Laws are unclear on how the technology fits in with compliance.

As Ameriprise case shows, firms on hook when brokers go bad ​

The SEC will collect $4.5 million from the brokerage firm for failing to supervise brokers who were ripping off clients.

10 highest paid professions in America today

These are the top-paying jobs in the U.S., according to Glassdoor.

Ameriprise to pay $4.5 million to settle SEC charges that five reps stole more than $1 million from clients

Agency censures firm for not protecting clients from thieving brokers.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print