Markets

Lisa Abramowicz is a Bloomberg Gadfly columnist covering the debt markets. She has written about debt markets for Bloomberg News since 2010.

Former bond king Bill Gross is playing a game that he’s destined to lose.

The billionaire apparently wants to prove he’s every bit as awesome as he used to be, when he led the world’s biggest bond fund during a decades-long bull market in debt. And he pretty clearly intends to undermine and humiliate his former employer, Pimco, for pushing him off his throne last year.

Instead, he’s causing a circus and hasn’t attracted much cash to his new employer, Janus Capital, which hired him in September 2014. He wasn’t able to capitalize two of his best calls of the year, short-selling both the Chinese stock market and German government bonds. His Janus Global Unconstrained Bond Fund has underperformed many of its peers this year, declining 1.2 percent, data compiled by Bloomberg show.

To compound matters, Gross sued Pimco and its parent company for hundreds of millions of dollars last month, contending he was wrongfully pushed out as chief investment officer by a "cabal'' of executives who were "driven by a lust for power, greed, and a desire to improve their own financial position'' at the expense of investors. Bloomberg Intelligence's Eric Balchunas pointed out that deep in the lawsuit is a point that may bolster claims in a separate shareholder suit filed last year about Pimco's fees being too high.  

If Gross hadn’t made such a big show about proving himself and tearing down his former employer, the weak performance wouldn’t be all that remarkable, especially considering some of the huge losses experienced by hedge funds in 2015.

But he did, and some of his biggest investors are losing patience. One of his most-notable supporters, George Soros’s firm, reportedly pulled almost $500 million from an account managed by Gross in recent months. The assets in Gross’s unconstrained fund have dropped to about $1.38 billion from a peak of about $1.52 billion in April.

Gross's struggles with ideas of greatness and mortality have been magnified by his huge stockpile of cash, but his antics highlight how out of date such chest-beating and hubris is right now.

This is a new era, in which it’s appropriate to accept small returns, or even just the avoidance of losses, while studying the sustainability of corporate and government balance sheets. The larger-than-life persona doesn’t fit so well in the face of stubbornly slow global growth and unconventional monetary policies.

It’s easier to seem prescient and important when making grand statements like, “The housing market is a complete bubble and will implode!” or “There’s an amazing run left in government bonds!” It’s much harder to sound exciting and different when shouting, “Who knows what’s going to happen with this market?” and “Companies need to innovate!”

Gross had a terrific run while managing the Pimco Total Return Fund. He made some excellent calls. He’s now a throwback to another era. And that era is over.

This column does not necessarily reflect the opinion of Bloomberg LP and its owners.

To contact the author of this story:
Lisa Abramowicz in New York at labramowicz@bloomberg.net

To contact the editor responsible for this story:
Daniel Niemi at dniemi1@bloomberg.net