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Bill Gross: Still the Bond King—The 2015 IA 35 for 35

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Probably no mutual fund manager is as famous or as influential in the investor advisor industry as Bill Gross, now a five-time member of our IA 25 list.

Up until late September 2014, he ran the world’s largest bond fund, the PIMCO Total Return Fund, which he created in 1987 and grew to $270 billion in assets by 2012. (The Vanguard Total Bond Market Index fund took the world’s-largest title in May). The fund often outshined its competitors, earning Gross Morningstar’s Manager of the Decade award in 2010 for “investment calls and top-notch performance” that made investors $47 billion wealthier and Gross “one of the best investors of our era.” The Bond King ruled.

But in 2013 PIMCO Total Return posted its first loss in 14 years, underperforming the majority of its peers that year and the next, suffering almost 17 months of non-stop redemptions.In September 2014, Gross suddenly announced he was leaving the company he had co-founded more than 40 years before for a new job at Janus Capital Group. A few days before, it was reported that the SEC was investigating whether PIMCO had artificially boosted the returns of its Total Return ETF managed by Gross, according to “people familiar with the matter.”

Gross’s departure was especially surprising since he was by then the sole leader of PIMCO after his co-chief investment officer, Mohamed El-Erian, unexpectedly resigned months before following rumors and reports of growing tensions between the two men.

Gross, as usual, triumphed. Ten million dollars immediately followed him out the door to the new Janus Global Unconstrained Bond Fund that he started, and legendary billionaire investor George Soros invested $500 million in a separately managed Janus account managed by Gross.

By April 10, assets of the Unconstrained Bond Fund had had grown to $1.5 billion. The growth, however, wasn’t due to only performance and inflows. Gross himself had invested $700 million in the fund, Janus Chief Executive Dick Weil disclosed in January.

It was another surprising revelation about a money manager and financial executive who doesn’t cease to amaze, often but not always because of his market prowess.

In 1999, Gross warned in his monthly market letter that the dot-com bubble would soon burst, and it did the following year.

In Late March 2006, he wrote that the Fed would soon stop raising interest rates. After two more rate hikes, the Fed ceased its rate hikes, and a year later began a historic run of rate cuts until they finally fell to near zero.

And in the midst of the financial crisis, Gross started buying up mortgage-backed debt issued by Fannie Mae and Freddie Mac, betting that the federal government would ultimately come to the aid of those failing agencies, which it did a few months later.

Those bold positions paid off for Gross and his partners who sold PIMCO to Allianz for $3.3 billion in 2000. Gross got $233 million for his stake and another $40 million from a retention bonus. He now ranks #272 on Forbes list of the 400 richest people in America, with an estimated net worth of $2.3 billion.

But Gross isn’t just about money and the markets. The former blackjack player and naval officer is also a renowned stamp collector – there’s a William H. Gross Stamp Gallery at the Smithsonian’s National Postal Museum — and a longtime yoga enthusiast who has said he gets some of his best ideas when standing on his head. And he can be eccentric.

In June, he took to the stage at Morningstar’s Investor’s conference donning sunglasses and asking journalists to play a game with him, based on the brainwashing exemplified in “The Manchurian Candidate,” a 1960s movie about an unwitting American sleeper agent for the Soviets and his handler-mother. “Repeat after me,” Gross said. “Bill Gross is the kindest, bravest, warmest, most wonderful human being you’ve met in your life.”

Despite that performance and the fact the he no longer runs the world’s largest bond fund, Gross still attracts the attention of the media in his broadcast interviews on CNBC and latest monthly blogs, and his new fund is once again outperforming many of its peers. Year-to-date through April 10 it was up 2.03%, besting 95% of the funds in its category.

In his April investment outlook Gross writes that the “real new neutral interest rate” — the central bank rate that neither stimulates nor restrains growth, adjusted for inflation — is near 0%, in the U.S., U.K. and Germany, and savers and investors will have a hard time earning “sufficient returns to satisfy presumed liabilities.” He suggests instead a “cheap” and “cautious” leverage strategy that focuses on selling volatility around overvalued assets such as the government debt of Germany, U.S. and U.K. to boost returns. Like a smart investor who doesn’t want to reveal his hand, Gross doesn’t get any more specific than that.

See the full 2015 IA 35 for 35 and the calendar for extended profiles of each honoree.