Close Close

Portfolio > ETFs > Broad Market

Lessons From Bill Gross' Departure From PIMCO

Your article was successfully shared with the contacts you provided.

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 managerand fans of Bill Gross will no doubt flock to it.