Markets shocked as ‘bond king’ Bill Gross quits Pimco

Bill Gross, the head of PIMCO and known as the 'king of bonds' (Rex Features)

Bill Gross, the “bond king”, rattled the markets today when he abruptly quit Pimco, the investment giant he founded in California in 1971, amid “fundamental differences” with the board.

Mr Gross’s departure to join smaller rival Janus Capital moved the international bond markets, with UK and US government bonds falling amid speculation about what would now happen to Pimco’s portfolio now its co-founder and chief investment officer was leaving.

Shares in Pimco’s parent, the German insurer Allianz, also fell 5 per cent while Janus Capital’s stock surged as much as 40 per cent amid expectations that many of Mr Gross’s clients would follow him from the $2trn firm to one managing about $180bn (£110bn).

It has been a torrid year for Mr Gross as Pimco has been hit by big outflows, the acrimonious departure of his heir-apparent Mohamed El-Erian (citing his daughter’s complaints about his working hours) and, earlier this week, the news that Wall Street regulators are investigating the valuation of one of its flagship retail funds.

Earlier this year Bloomberg Businessweek ran a cover story on Mr Gross titled “Am I really such a jerk?”

Mr Gross responded to his critics by turning up at a major investment conference wearing sunglasses and calling himself “a 70-year Justin Bieber”.

Pimco was expected to name its deputy chief investment officer Daniel Ivascyn to replace Mr Gross. Another deputy CIO is Andrew Balls, brother of the shadow Chancellor Ed, who manages its European operations from London.

Douglas Hodge, Pimco’s chief executive, said: “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.”

Mr Gross said: “I look forward to returning my full focus to the fixed-income markets and investing, giving up many of the complexities that go with managing a large, complicated organisation

“I chose Janus as my next home because of my long- standing relationship with and respect for [its chief executive] Dick Weil and my desire to get back to spending the bulk of my day managing client assets.

“I look forward to a mutually supportive partnership with [Janus Capital’s] fixed-income CIO Gibson Smith and his team; they have delivered excellent results across their strategies, which deserve more attention.”

The signing of Mr Gross is another coup for Janus Capital, which is currently known more as a specialist in equities, as it tries to build up its presence in fixed-income markets. It announced in July that Myron Scholes, who won the Nobel prize for work determining the value of derivatives, would join the firm.

Its boss, Richard Weil, was chief operating officer at Pimco from 2000 to 2009.

Mr Gross will start work at Janus Capital on 29 September at a new office to be established in Newport Beach, California, to manage the recently launched Janus Global Unconstrained Bond Fund and related strategies. He also joins the Janus team focused on global asset allocation.

“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,” said Mr Weil.

Mr Gross earned his golden reputation as the “bond king” for the stellar, long-term performance of the Pimco Total Return Fund, the world’s largest bond fund.

Recently, though, his reputation has been slightly tarnished due to redemptions from the Pimco Total Return Fund. In August the fund suffered its 16th straight month of outflows, and its performance lagged 73 per cent of its peers, according to data from the news agency Reuters.