Bill Gross’s move from the company he co-founded in 1971 to rival Janus Capital will have a major impact on market according to market commentators.
The manager this afternoon announced he would be joining Janus to run its Unconstrained Bond fund but the move could cause liquidity issues in the bond market particularly if Mr Gross’s $236bn Total Return fund suffers sustained outflows.
Darius McDermott, managing director of FundCalibre, said Mr Gross’s departure was a “seismic event for the fund management industry globally”.
“Neil Woodford’s exit from Invesco Perpetual pales in comparison to this departure,” he said.
“Mr Gross co-founded Pimco and ran its $236bn Total Return fund. In spite of some performance issues in the past few years, he has arguably been the best global bond manager in history.
“This shock development is interesting for fixed income teams around the globe as groups will attempt to capture some of the outflows from Pimco. While this is clearly a stunning addition to the Janus fixed income team, for Pimco, it can only be looked upon as a major loss.”
Recation on Twitter has also been wide ranging, with SVM Asset Management’s Colin McLean saying the US high yield market was “not looking great even before the Bill Gross exit” meaning it “could be a tough time to liquidate”.
In July this year, several experts told Investment Adviser there was an intense lack of liquidity in bond markets.
Brewin Dolphin’s head of research Guy Foster said the company had spoken to Pimco but it “couldn’t provide any details on how they would restructure following his departure”.
“Mr Gross is named as a manager on funds which are mostly very liquid and some unconstrained mandates,” he said.
“Some 60 per cent of the Total Return fund’s holdings are US government or agency securities.
“Investors should not be concerned with the fund’s ability to manage large withdrawals as a result of this announcement.
“Treasury yields rose 5 basis points but the news coincided with US Q2 GDP release (basically inline) which, let’s face it, might have eclipsed even the great man’s career change.”
Mr Foster added, however, there was “a risk of large withdrawals” in Pimco’s other less liquid mandates and it was “difficult to judge how the market is going to cope”.
“We aren’t yet seeing any meaningful reaction in credit which is where the biggest risk would lie,” he said.
“Naturally this is a situation worth monitoring though. The obvious succession would be for Mohammed El Erian to resume his chief executive and co-chief investment officer roles but Bloomberg reports that Pimco are denying Mr El Erian will return.”
