Pimco’s New Star: The Man Who’s Beating Bill Gross
Pimco’s highly publicized dispute with its superstar fund manager Bill Gross – and his departure from the firm three years ago – led many on Wall Street to wonder whether Pimco would lose its magic touch for bond investing as clients withdrew billions of dollars from the firm.
Beating Bill Gross
Don’t tell that to Pimco chief investment officer Dan Ivascyn, whose own Pimco Income Fund has produced greater returns than nearly any other comparable fund over the last three and five years, recently posting a 10.6% gain in the past 12 months, according to data from Bloomberg and Morningstar. The fund is on track to beat the return on the Bloomberg Barclays U.S. Aggregate Bond Index for a sixth straight year, the Wall Street Journal reports.
The result has been predictable: money has been flooding in from investors, at a faster pace than for any other actively managed fund, either equity or fixed income, Bloomberg reports. The Pimco Income Fund reached $75.4 billion in assets by the end of February, eclipsing the Pimco Total Return Fund, formerly managed by the legendary Bill Gross, which is down to $74.2 billion. The latter fund has steadily lost assets after Gross’ departure, Bloomberg notes.
Invascyn and co-manager Alfred Murata made several moves in 2016 that paid off handsomely. In short, as Ivascyn told Bloomberg, they took advantage of situations where the markets had overreacted, sending bond prices temporarily down to bargain levels.
While hedge funds sold subprime mortgage bonds to meet redemptions, the Pimco Income Fund scooped them up at depressed prices. The fund also went bargain hunting when riskier corporate and government bonds sank on declining oil prices and the Brexit vote. Before the U.S. election, the fund reduced holdings of U.S. Treasury debt, expecting improved economic growth and higher interest rates, then bought after the election, when rates had risen and bond prices had sunk.
No Star System
Ivascyn is a detail-oriented investor who shuns the media spotlight and closely reads bond prospectuses and agreements, according to Bloomberg. By contrast, his predecessor at Pimco, Bill Gross, was and remains a familiar face on financial TV programs and is known for writing colorful, highly provocative commentaries.
Gross’s high profile and status as the public face of Pimco became problematic with his contentious exit from the firm in 2014. Ivascyn is committed to reducing the inherent risks in relying on one star manager by building a team of top talent, hiring experienced people with diverse areas of investing expertise from other leading asset management companies, Bloomberg reports.