Everyone’s favourite oddball bond manager is back with a new investment outlook. The theme is what nursery rhymes can tell us about monetary policy, or something, but the opening is worth reading by itself:
Punch and Judy fought for a pie.
Punch gave Judy a sock in the eye.
Said Punch to Judy, “Would you like any more?”
Said Judy to Punch, “No my eye is too sore.”
– Mother Goose nursery rhyme Read more
A good catch from FundFire, on an offer of reduced fees for 12 months to a client thinking about leaving Pimco.
The fee structure was revealed in an memo to the San Luis Obispo County Pension Trust (SLOCPT) by its consultant Wurts & Associates, which has recommended that clients terminate their relationship with Pimco following the departure of chief investment officer Bill Gross for Janus.
The SLOCPT’s current fee structure includes a 0.5% fee on the first $25 million under management, 0.375% on the next $25 million and 0.25% thereafter. The proposed fee reduction would switch the pension over to a 0.05% (5 bps) base fee and a “15% participation rate for returns that exceed the index return plus the base fee (returns in excess of the index plus 5 bps).” The discount would “revert to current fee terms after 12 months.” PIMCO did not respond to requests for comment.
“Why, all the better to see and hear you coming with my dear!”
Little Red Riding Hood is the cautionary tale of what happens to the naive and gullible if they trust or listen to strangers. Specifically, it’s the story of a little girl who gives away too much information to the Big Bad Wolf who then uses it to create a situation where he can much more easily eat her up for lunch — by masquerading as her loving grandmother — out of sight of the regulatory oversight of the local woodcutter enforcement committee.
Or, as the Charles Perrault version of the story goes:
As she was going through the wood, she met with a wolf, who had a very great mind to eat her up, but he dared not, because of some woodcutters working nearby in the forest. He asked her where she was going. The poor child, who did not know that it was dangerous to stay and talk to a wolf, said to him, “I am going to see my grandmother and carry her a cake and a little pot of butter from my mother.”
It begins ominously:
Dancing, or better yet as the beginning of my Investment Outlook suggests, being asked to dance, seems to have become an important part of my life over the past month or so. Having first been asked by my wonderful wife, Sue, and now by Dick Weil and Janus from a business standpoint, I write to you today from my desk in a new Janus office in Newport Beach, California. Read more
So you thought Pimco was under scrutiny before. The departure of Bill Gross — co-founder, monarch, guru, talisman — provides a case study into one of the questions at the heart of asset management. Is it the person or the process?
It is more than a theoretical question. The immediate reaction to Friday’s news from old industry hands, beyond “blimey!”, is that any organisation other than Pimco would be going straight onto the watchlist for redemption of assets by the investment consultants who direct so much institutional investor money.
Pimco, though, is a machine. Read more
They say that to lose one figurehead may be regarded as a misfortune; to lose both looks like carelessness. Read more
One private equity chief went so far as to publicly thank Ben S. Bernanke, the Federal Reserve chairman until last month, whose program of extraordinary economic stimulus has helped push stocks higher, feeding the private equity machine.
“Thank you, Ben Bernanke. I saw him last Thursday, and I thanked him,” Mr. Schwarzman of Blackstone said during a conference in December. “The opportunity for us to be able to attract funds is very, very high.” Read more
Bloomberg Businessweek has the latest big interview with the king of Pimco. Click for the low down on special-K served Mercedes-style, the big man’s seven screens, and expansion as a dairy-based process:
First there were the tweets (since deleted) that appeared to get China’s interest in Treasuries the wrong way round. Now Bill Gross has started to see the hand of his former co-chief investment officer everywhere he turns.
Reuters reports that Pimco’s main man told them he had “evidence” that Mohamed El-Erian was behind the WSJ’s brutal account of the rift at the top of the bond house, but when they asked to se it? Well: Read more
Given that a certain Secretariat of the world’s biggest bond fund has attracted some attention of late, lets give the newest investment outlook from Pimco’s Bill Gross the once over.
On Sunday Pimco issued an intriguing tweet from Bill Gross, the undisputed King of the bond mountain.
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, submits this guest post to FT Alphaville.
Note: an earlier post attributed to Mohamed was published in error. This was old copy. Apologies!
Every once in a while you get an almost perfect alignment between the trio of overall market performance, relative moves, and the news flow.
Monday morning proved to be one of these cases – shedding interesting light on immediate market drivers and how they interact. But the bigger market complexities and uncertainties – and, therefore, where legitimate differences of views exist – are impacted only marginally. As such, durability is an open question. Read more
Although huge, all conquering, dollar-scooping behemoths of asset management would also seem to work.
Towers Watson and Pensions & Investments have counted up money manager dollars world-wide, once again, and when it comes to size, passive investment products are (almost) the only game in town. Read more
1986: In a note headlined ‘Bond Wars’, Bill Gross lightheartedly suggests the Force is with PIMCO, much as it was with Luke Skywalker in the fictional Star Wars films.
(If inaccurately — Gross called the Force “really the intuition handed down to [Skywalker] through generations of previous starfighters”. Nah.)
2013: In a note headlined ‘Bond Wars’, Bill Gross says “PIMCO will not go down at the Somme.”
Really. Read more
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, discusses recent market swings.
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Click to enlarge. Hat-tip to the FT’s Kerin Hope and Sigma TV:
Bill Gross has penned some very deep and meaningful thoughts in his latest note, which happens to include the following (rather creepy?) pic:
Here’s the gist of the piece for some caption-competition inspiration: Read more
NEW YORK, March 1 (Reuters) – Bill Gross, the co-CIO and co-founder of bond giant Pimco, said on Thursday that the decision by a major derivatives agency to not declare a credit event on the writedown of Greek sovereign debt sets a dangerous precedent.
We’re confused. Contrast: Read more
Pimco’s Total Return Fund, managed by Bill Gross, now holds Treasuries to the greatest extent since July 2010, departing from sharp cuts to its holdings in 2011, Bloomberg reports. Holdings of US government debt rose to 38 per cent last month from 30 per cent in December. The fund gained 2.13 per cent in January, beating almost all of its peers, according to Bloomberg data. Gross nevertheless faces rising doubts that the $250bn Total Return Fund has become too big to manage and too reliant on derivatives, says Reuters in a special report.
Pimco’s Bill Gross has increased his holdings of Treasuries to the highest level since July 2010, a year after banishing US government debt from the world’s biggest bond fund, reports Bloomberg. Mr Gross boosted the proportion of US government and Treasury debt in Pimco’s $250.5bn Total Return Fund in January to 38 percent from 30 per cent in December, according to a report placed on the company’s website. He raised mortgages to 50 per cent, the highest since June 2009, from 48 per cent in December.
Presented without comment:
Where do we go when we die?
We go back to where we came from
And where was that?
I don’t know, I can’t remember
Virginia Woolf, “The Hours” Read more
The US Treasury sold 10-year debt below a yield of 2 per cent for the first time on Wednesday, with investors locking up their money at low returns for the safety of owning government debt, the FT reports. The $21bn of new paper was sold at a yield of 1.90 per cent, the lowest level in the modern era, and inside last September’s auction yield of 2 per cent. Non-dealers bought 55 per cent of the sale and the bid-to-cover ratio of 3.29 times, a sign of demand for the paper, was the third highest on record. Pimco also disclosed on Thursday that Bill Gross had increased his holdings of Treasuries in the asset manager’s $244bn flagship fund for the third month in a row, to the highest level in over a year. The Total Return found now has a 30 per cent weighting in government debt, up from 23 per cent at the end of November.
Mohammed El-Erian has penned a few thoughts about Germany’s negative yielding bubill auction and indentifies — quite rightly — that there are major risks associated with this precedent.
Ultimately, as FT Alphaville has also argued, a negative yielding regime of this sort could bring about exactly the sort of voluntary capital destruction conditions that turned the 1930s crisis into a depression. Read more
Pimco’s flagship bond fund, the world’s largest, experienced annual outflows for the first time in its history in 2011, according to research group Morningstar. The FT reports the $240bn Total Return Fund run by Bill Gross had attracted fresh investor capital every year since its inception in 1987, and it success has played a central role in the growth of the asset manager based in Newport Beach, California. However, Mr Gross ranked behind more than two-thirds of his peers last year, following a high-profile bet that US government debt would fall in value. Investors pulled $1.4bn from the Total Return Fund in December, taking outflows for the year to $5bn, according to Morningstar. Since November 2010, Pimco has seen a net $13.7bn pulled from its flagship fund.
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, responds to the outcome of the G20 Cannes summit.
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Bill Gross has made a big U-turn in the investment strategy of his $242bn fund after a high-profile bearish call on the US Treasury market backfired, the FT says. After largely exiting US bond markets in February on fears of a spike in inflation, the Pimco bond manager began reversing course in the summer. More recently, he has placed a big bet on lower long-term interest rates that radically shifts the composition of his fund. he move, revealed by Pimco this week, comes after a humbling year for a fund manager often feted for his investing acumen and influence on the bond market. His flagship fund has produced a return of just 1.9 per cent for its investors so far this year, leaving him ranked 552 out of his 604 peers according to Lipper, a research house.
Bill Gross has made a big U-turn in the investment strategy of his $242bn fund after a high-profile bearish call on the US Treasury market backfired, triggering deep underformance by the world’s largest bond fund, the FT reports. After largely exiting the US Treasury bond market in February on fears of a spike in inflation, the Pimco bond manager has reversed course, placing a big bet on lower long-term interest rates that radically shifts the composition of his fund. The move, revealed by Pimco this week, comes after a humbling year for a fund manager often feted for his investing acumen and influence on the bond market. His flagship fund has produced a return of just 1.9 per cent for its investors so far this year, leaving him ranked 552 out of his 604 peers according to Lipper, a research house. By comparison, the Barclays US aggregate bond index has returned investors 6.7 per cent year to date.
Bill Gross, manager of the world’s largest bond fund for Pimco, has admitted that it was a mistake to bet so heavily against the price of US government debt in an FT interview. Gross emptied his $244bn Total Return Fund of US government-related securities earlier this year in a high-profile call that has backfired as the bond market has rallied. As of Monday, Pimco’s flagship fund ranked 501th out of 589 bond funds in its category. See also FT Alphaville.
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, responds to the Federal Reserve chairman’s speech at the Jackson Hole conference.
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There are literally a thousand notes in our inbox this Jackson-Hole Friday morning, going something like:
“Bernanke unlikely to pave the way for QE3“ Read more