Bond King Is Gone. Long Live Pimco.

Bill Gross

Photographer: Andrew Harrer/Bloomberg

Pimco may have won as much as it lost after its co-founder Bill Gross left a year ago.

Many predicted disaster, or at least painful struggles, for the $1.5 trillion asset manager after it pushed out Gross, widely known as the “Bond King.” But the firm’s flagship bond fund, which at one point was the biggest in the world, has generally maintained or even improved its performance, even while contending with billions of dollars of withdrawals.

The firm, based in Newport Beach, Calif., has become a more collaborative place without the oppressive dominance of Gross, who’d become increasingly erratic in both behavior -- who can forget the ode to his dead cat, Bob -- and performance -- which was choppy in his last years at the firm.

Gross, who surged to fame during a three-decade bull market in bonds, struggled to regain his footing in an era of paltry bond yields. His heir apparent, Mohamed El-Erian (who writes columns for Bloomberg View), announced in January 2014 that he was stepping down. Gross started writing long, philosophical missives about life and death. He donned sunglasses at a conference presentation in June 2014, at which he said, “When you’re 70 years old, you need things. You need props. Even guys need a little makeup and stuff.”

His angst was mirrored in unpredictable returns. The Total Return Fund, which managed as much as $293 billion at its peak, gained 4.2 percent in 2011, even though a broader benchmark index returned almost twice as much. Gross was unable to avoid the carnage of 2013, losing almost 2 percent, which was in line with the market’s decline.

In May 2014, he vowed to rank on top, “not close to the middle,” after some of his funds trailed peers in the previous year. Instead, the year ended early with his abrupt departure on Sept. 26 after he lost an internal power struggle.

His less flashy successors have held their own, even while facing about $360 billion of investor withdrawals. For example, the flagship bond fund rebounded earlier this year as the new managers reduced the fund’s exposure to debt maturing within five years, with Gross going the other way.

Pimco’s Total Return Fund has eked out a 1.7 percent gain in the past 12 months, performing better than 57 percent of its peers during the period. That compares with outperforming only 49 percent of its rivals during the past three years, which included two years of Gross calling the shots.

Gross, meanwhile, has been overseeing the $1.4 billion Janus Global Unconstrained Fund that’s lost 2.3 percent over the past 12 months. That’s similar to the Pimco Unconstrained Fund, which is down 2.7 percent in the period, but worse than the $49.2 billion Pimco Income Fund, which has returned 1.7 percent in the past year, ahead of 67 percent of its rivals.

While the unprecedented withdrawals from Pimco have slowed, Gross has been unable to regain his touch in attracting piles of cash from investors for his new fund.

Pimco avoided the palace drama of a king who was struggling to come to terms with losing his grip on his throne as it became harder and harder to replicate his earlier victories. It sidestepped sweeping fire sales and didn’t prompt a paralyzing bond-market liquidity crunch. It’s still enormous.

More important, it has demonstrated that the kingdom can survive -- and perhaps even thrive -- through a crisis, and without its mercurial monarch.

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