If you haven’t heard the news by now, Bill Gross, the long-time portfolio manager and co-founder of PIMCO, announced he left the firm to take a position to manage a new bond fund at Janus Funds on Friday, September 26. While the timing of this news was unexpected, anyone who has followed the company over the past year would know that some of the internal challenges at PIMCO would eventually need to be resolved over the long-term. Whenever a key member of any fund firm such as Bill Gross decides to leave a firm, it raises many issues and concerns, and rightfully so. Investors have every right to ask questions and rethink their reasons for owning the fund in the first place. The kneejerk reaction is to quickly sell the fund and move on, but it may not be the best decision.
Our investment team at Bloom Asset Management takes very seriously the departure of any key fund manager, and our first course of action is to reach out to the fund company to obtain more information. Fortunately, we have the ability to immediately contact firms like PIMCO to gain more insight about manager changes, performance issues, etc. This is an advantage we have over retail investors and one that we leverage during events like this. Investors that do not use professional advisers like us have to rely on other sources like Morningstar for additional insight. Thankfully, Morningstar and other financial firms do a reasonably good job of releasing free information on their specific views.
Bill Gross’ influence at PIMCO is well-documented, at least to investment advisers like us, but to PIMCO’s credit, they have taken steps over the past few years to reduce reliance on any specific individual. We see this occur at other funds as well, which may be a positive development. As a result, senior management believes they are able to digest a departure such as Gross’. The black eye PIMCO is suffering with this departure though comes on the heels of another key member that abruptly left the firm earlier in the year, so there remains a stewardship and stability concern among investors as well as advisers that use their bond funds.
While we have always admired Bill Gross’ expertise in running his various bond funds, we have been just as impressed with the depth and talent at PIMCO that were also instrumental in helping Gross run his funds. That being said, we generally move cautiously whenever there is management turnover due to possible strategic changes, liquidations, other key departures, and other factors that may arise. So while we are confident PIMCO has moved quickly in announcing three co-portfolio managers to takeover at Total Return, we plan on continuing to monitor the company and are watching carefully for any staff defections or change in performance.