Bond King Bill Gross is leaving PIMCO, the world's largest bond fund, to join rival Janus after clashing with board members and overseeing the worst annual returns. Conway G. Gittens reports.
The Bond King is shaking up his kingdom and all of Wall Street in the process. Bill Gross, the 70-year old long-time fund manager of the world's largest bond fund, the PIMCO Total Return Fund - stepping down from the company he founded to run a bond fund at a rival - Janus. Gross had threatened to leave many times, according to our source, after numerous clashes with the executive committee. His threat came one time too many and the board was ready to give him the boot tomorrow, but he beat them to the punch. His departure comes at a tumultuous time for PIMCO, which was bought by German insurer Allianz, back in 1999. Just this week, the Wall Street Journal reported the fund is under investigation by the Securities and Exchange Commission for possibly artificially pumping up returns for an exchange-traded bond fund managed by Gross. Word of that investigation comes after a very public and nasty battle with his former lieutenant Mohammed El-Erian, who left PIMCO but stayed on in an advisory role at Allianz. Add to that, what's actually going on with the fund. Investors have been running away for a record 16 straight months and taking with them almost $70 billion, according to fund watcher Morningstar. Last year the fund's performance was the worst in nearly two decades. Snagging Gross is a big coup for Janus. Shares of Janus seeing a monstrous pop at the open, surging to highs not seen since 2010. Robert Lee at Keefe Bruyette and Woods writes, "We suspect that some assets could follow Gross to Janus, but this is impossible to quantify that at this point." With that in mind, shares of Allianz tumbling in Germany even though the company says it was not caught off guard and already has a succession plan in place. Gross' departure from PIMCO is immediate and he starts his new job at Janus on Monday. There was some reaction in the market with bond yields spiking on fear his departure might force selling but that reaction quickly calmed down.