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Bill Gross Leaves PIMCO for Janus, JNS Stock Soars 30%

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Bill Gross, the founder of the Pacific Investment Management Company (PIMCO), is leaving the firm to join Janus Capital . Mr. Gross is arguably one of the most impactful bond investors in the world, heading a team that amassed global assets over $2 trillion in his days at PIMCO.

Mr. Gross stated in a press release, “Today, with a mixture of excitement and sadness, I am announcing that I have decided to join Janus Capital Group and end my association with PIMCO.  It was not without great thought and deliberation over quite some time that I decided to begin this next chapter.  During my time at PIMCO we accomplished a great deal, managing now over 2 trillion dollars of global assets with a track record of very significant value added that has generated tens of billions of dollars to individual, corporate, and sovereign client portfolios.”

Gross continued, “But now, after having spent considerable time serving in senior management, it is a time for me to reduce executive and people management responsibilities at a larger firm and focus on the pure aspects of portfolio management at a smaller one.  Janus is the right fit at the right time in my career – and my life.”

Gross will oversee the Janus Unconstrained Bond Fund (JUCTX - Free Report) and will be responsible for building out the efforts in global macro fixed income strategies.  In his days at PIMCO, his Total Return fund amounted around $220 billion in AUM and will now manage about $13 million AUM.  That number seems poised to grow as more investors look likely to jump to this fund to access Gross’ views on the bond market.

Total Return Fund (PTTRX - Free Report)

Still, it is important to note what Gross is leaving behind at PIMCO, namely the Total Return Fund. The following is the historical and current price since the inception of the Total Return Fund, the ultra-popular fund that Bill Gross managed during his tenure at PIMCO.

 

Allocation Breakdown  
U.S. Treasury Obligations 33%
U.S. Government Agencies 20.10%
Corporate Bonds & Notes 13.30%
Sovereign Issues 10.20%
Short-Term Instruments 10.00%
Mortgage-Backed Securities 6.30%
Other 7.10%
 
“Bill Gross has an exemplary track record with decades of success and he will offer an exceptional approach to navigating today’s increasingly risky markets with a focus on macro, unconstrained strategies. His involvement provides Janus a unique opportunity to offer strategies and products that are highly complementary to those already managed by our credit-based fixed income team,” said Richard M. Weil, Chief Executive Officer of Janus Capital Group.

“With Bill leading our global macro efforts and Gibson our credit-based fixed income team, I am confident Janus will be able to meet the needs of virtually any client.”

Difference in Views

In the press release from PIMCO, Mr. Hodge stated, “While we are grateful for everything Bill contributed to building our firm and delivering value to PIMCO’s clients, over the course of this year it became increasingly clear that the firm’s leadership and Bill have fundamental differences about how to take PIMCO forward.”

According Bill’s statement, it seems as if he was making his own choice of leaving PIMCO to join Janus Capital Group.  However, according to PIMCO’s press release, it seems not so, suggesting there was probably a dispute that led to this change.  

Events leading up to today

Earlier this year in January, Chief Executive Mohamed El-Erian, supposedly Mr. Gross’s successor, left the firm abruptly. Mr. Gross replaced him with six deputy chief investment officers, but the move has failed to stem outflows across the whole company.  After the incident, reports emerged of a contentious and tense environment at the investment firm.

Earlier this week, the Journal reported that the Securities and Exchange Commission is investigating the $3.6 billion PIMCO Total Return ETF (BOND - Free Report) for artificially boosting returns. The SEC is concerned that the PIMCO Total Return exchange-traded fund may have inflated the value of its holdings, but it has yet to have much effect on the ETF’s trading, though it does showcase what a brutal week it was for the bond giant on multiple fronts.



 
Aftermath

Following the release of the unexpected announcement, shares of Janus surged in pre-market trading, first by 20%, then 30%; they’re currently up about 33%. Meanwhile, shares of Allianz — the German multinational of which PIMCO is a subsidiary — sank more than 5% on the news, and are currently down 6.18%.

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