Bill Gross’ Bond King Crown Now Firmly Sits on Jeff Gundlach’s Head

As the faded master bond investor announces his retirement, the usurper keeps growing in stature.

Bill Gross

The king is … well, retiring. Long live the king. Actually, the lengthy reign of Bill Gross, known as the King of Bonds, ended a while ago. And a usurper, Jeff Gundlach, took his crown.

But Monday’s announcement that Gross was retiring from his four-decade-long career as a bond portfolio manager solidified Gundlach’s status as the most prominent fixed-income manager.

For some time, Gundlach has been outperforming Gross. And the mantle has been shifting gradually over the past few years. In early 2016, Gundlach replaced Gross on the prestigious Barron’s Roundtable, a group of financial savants that get together to opine on the markets for the magazine’s readers.

Gross, 74, said he will now manage his own money and give to charity. Gundlach, 59, is still building an investment powerhouse.

The two men have much in common, including high intellects and large egos. As a young man, Gross earned his grubstake counting cards at Las Vegas blackjack tables. Gundlach was summa cum laude in math and philosophy at Dartmouth.

They both were booted out of the investment houses that had built their reputations. In fact, Gross actually co-founded his—Pimco, in 1971—and went on to dazzle the world with his ambidextrous bond investing prowess. After a falling out with Pimco’s German parent, Allianz, he left in 2014, and joined a much smaller firm, Janus Henderson Investments.

The difference is that Gross seemed to lose his touch at the Janus Henderson Global Unconstrained Bond fund, which he launched. Over the past three years, it has averaged 0.34% annually versus 1.94% for the Bloomberg Barclays Aggregate, the bond benchmark, according to Morningstar data. Last year, it lost 3.88% when the Agg was up 0.01%.

Gundlach similarly was tossed out of TCW (he originally joined as an employee), but went on in 2010 to found his own house, DoubleLine, which has done quite well. His flagship, the DoubleLine Total Return fund, beat the Agg, advancing 2.25% over the past three years and last year was up 1.75%.

Gundlach’s flagship now has $48 billion in assets. Gross’ Janus vehicle topped out at $2.2 billion and now lists just $950 million.

In 2018, Janus Henderson’s CEO, Richard Weil, said Gross had “been wrong and wrong badly in the short term. And he’s accountable and we’re accountable for that.”

At one point, before he joined Janus, Gross proposed to Gundlach that they join forces, Forbes reported. The publication quoted Gundlach saying: “He said to me, ‘I’m Kobe Bryant, you’re LeBron James. I’ve got five rings, you’ve got two, but you are maybe on your way to five and you’ve got time.'”

Both investment managers run “go-anywhere funds,” which aren’t confined to one style or type of bond. Gundlach has a particular expertise in mortgage-backed securities.

And both have made big wagers on macro forces. They each have been way wrong at times, too. Gundlach once said a few years ago that municipal bonds were going to tank. And Gross more recently made a bad bet that US and German 10-year government bonds would converge.

Regardless, at this moment, the bond crown undeniably graces the brow of Jeff Gundlach.

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