Fed Denies Active Bond Managers a Star Turn
The central bank short-circuited the kind of opportunity that can produce big payoffs and market legends.
Jeffrey Gundlach built his reputation in the last crisis.
Photographer: Alex Flynn/Bloomberg
Active managers who aspire to greatness dream of the big crisis, the kind that throws everything into chaos. It’s in those moments that financial assets trade at fire-sale prices capable of delivering huge payoffs. As Baron Rothschild famously and grimly observed three centuries ago, “The time to buy is when there’s blood in the streets."
For a moment, Covid-19 looked as if it would produce such an opening. The scale and severity of the crisis are undeniable, and U.S. financial markets fell sharply when it became clear the virus would not spare the U.S. Active managers no doubt looked on eagerly. The record-long economic expansion that followed the 2008 financial crisis carried markets ruthlessly higher, leaving managers little opportunity to stand out.