The Business On... Bill Gross, Co-founder, Pimco
Stephen Foley is a former Associate Business Editor of The Independent, based in New York. He left in August 2012. In a decade at the paper, he covered personal finance, the UK stock market and the pharmaceuticals industry, and had also been the Business section's share tipster. Between arriving with three suitcases in Manhattan in January 2006 and his departure, he witnessed and reported on a great economic boom turning spectacularly to bust. In March 2009, he was named Business and Finance Journalist of the Year at the British Press Awards.
Wednesday 31 August 2011
The Bond King?
That's what they call him. Pimco is one of the biggest bond investment management companies in the world, and he personally runs its main fund, giving him power to spend $244bn – yes, billion – on behalf of investors.
Gulp, indeed. This stamp-collecting billionaire 67-year-old is therefore one of the biggest lenders to governments and companies, so when he says that the UK public finances are "resting on a bed of nitroglycerine" (as he did last year) or that the US government is "out-Greeking the Greeks" (this year) leaders pay attention.
But, hang on, haven't UK and US bonds done rather well?
Um, well, yes, this is all a little embarrassing. Mr Gross dumped all his holdings of US Treasury debt this spring, expecting bonds to fall in value when the Federal Reserve stopped buying them.
And then what happened?
They rose. And rose. To record levels. Not even Standard & Poor's downgrading the US from its AAA rating stopped them. With a double-dip economic slowdown on the cards, Treasuries look the safest thing out there. The performance of Mr Gross's Total Return Fund ranked 501th out of 589 bond funds in its category so far this year.
It might turn out that only good investment decision Mr Gross has made this year is to buy Jennifer Aniston's Beverly Hills pad, which he picked up for a cool $37m, $5m below the asking price. Who knows if he will have time to visit: he and his wife own at least eight properties in California alone.
Takes the sting off the poor returns
As he said in a mea culpa to the Financial Times, "When you're underperforming the index, you go home at night and cry in your beer. But who said this business should be fun? We're too well-paid to hang our heads and say boo hoo."
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