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Lessons From Bill Gross' Departure From PIMCO

By Ben Warwick

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Word that Bill Gross abruptly left the firm he founded in 1971 for greener pastures at Janus hit the investment press like a tsunami last Friday (see also What Bill Gross’ Resignation Means for PIMCO, Janus & Markets ).

Beyond the obvious hand-wringing about the fate of PIMCO and the entertainment value of active management, I can’t help but offer a few thoughts on the most shocking development in the fund industry so far this year.

  • The value of a succession plan. 
    How can a multi-trillion dollar organization not have a plan for moving forward after a star manager leaves? ThinkAdvisor has commented on this issue many times. For a firm of PIMCO’s size to ignore such risks seems unthinkable.
  • The relevance of active management. 
    Consider the experience of Bill Miller of Legg Mason, who witnessed 15 consecutive years of market-beating performance vanish during the global financial crisis. Are the rewards of seeking alpha in the traditional markets worth the risks? This thought-provoking question needs to be evaluated in light of current events.
  • ‘Star’ managers haven’t vanished.
    Mr. Gross is leaving a fund benchmarked to the Barclay’s Aggregate Bond Index to one not effected by benchmark-specific guidelines. The fund’s name was changed to include the word “Global” to further expand its horizons. 

    In other words, the fund will be a pure-play on the manager–and fans of Bill Gross will no doubt flock to it.