Bill Gross had nightmare day as fears about Italy roiled markets

His $2.1 billion bond fund fell about 3% Tuesday, leaving it trailing 96% of its rivals

May 30, 2018 @ 3:32 pm

By Bloomberg News

Bill Gross had his worst day in almost four years Tuesday. For other bond managers, it was more like Christmas in May.

The steep decline in interest rates triggered by fears that Italy might leave the euro sent Mr. Gross's $2.1 billion Janus Henderson Global Unconstrained Bond Fund down about 3% Tuesday, making a bad year even worse. Other prominent funds recorded their biggest one-day gain since 2009.

Bond yields plummeted Tuesday on prospects that Italy might need a fresh election that could be a referendum on the nation's inclusion in the eurozone. The yield on the 10-year Treasury note dropped to 2.78% from 2.93%. Rates rebounded Wednesday as investors deemed the market reaction to Italy's political turmoil overwrought.

The $77.2 billion Metropolitan West Total Return Bond Fund, the $38.1 billion Bond Fund of America and the $23.5 billion Western Asset Core Plus Bond Fund all climbed about 1%, the largest one-day gain in roughly nine years. Falling rates translate to an increase in bond prices.

Mr. Gross has struggled in 2018. His fund is down 5.9% for the year, trailing 96% of its rivals, according to data compiled by Bloomberg. The fund had an effective duration of minus 4.6 years as of April 30, meaning it would profit when interest rates rose and suffer if they fell. Duration measures sensitivity to changes in rates. Mr. Gross also relies on selling the equivalent of insurance against big market moves.

Mr. Gross declined to comment on his performance.

In the first quarter of this year, Mr. Gross attributed his fund's underperformance to a misplaced bet that U.S. and German bond yields would converge. On Monday, the extra yield investors demand to hold 10-year debt from the U.S. rather than Germany reached the most since 1989.

In 2010, Mr. Gross was named fixed-income manager of the decade by Morningstar Inc. Four years later, he took over management of the Janus Unconstrained fund after being ousted as chief investment officer at Pacific Investment Management Co., the firm he co-founded in 1971. Almost $700 million in the Janus unconstrained fund was Mr. Gross's personal money as of June 30, 2017, according to filings.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

InvestmentNews celebrates diversity & inclusion in the financial advice business

Highlights of the Excellence in D&I Awards, showcasing the achievements of 26 individuals and firms that are moving the needle when it comes to diversity and inclusion.

Latest news & opinion

Dawn Bennett found guilty of $20 million Ponzi scheme

Jury took less than five hours to convict the former financial adviser and radio host.

10 advisory firm employee benefits you won't believe

Some advisory firms stand out for their creative efforts to keep their troops happy and engaged. Spa retreat, anyone?

Small-cap funds take a beating

For most of the year, the sector had outperformed, but that all changed last week.

SEC commissioner Stein suggests Congress address differing broker, adviser standards

She said lawmakers may have to change 'solely incidental' language that lets brokers give advice.

Social Security and the fear of missing out

How to lower expectations when clients think they're owed a bigger Social Security benefit.

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