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)
