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How Should PIMCO Fund Shareholders React to the Departure of Bill Gross?

“Bond king” Bill Gross is leaving PIMCO, a company he co-founded, to join Janus Capital Group (JNS). Our mutual fund guide shows Gross as the lead manager on eight PIMCO mutual funds. Our exchange-traded fund (ETF) guide shows Gross as the lead manager on one PIMCO ETF. The Closed-End Fund Association’s website shows Gross managing two close-end funds. It is possible that there are institutional funds that Gross manages as well. A list of funds managed by Gross that are readily available to individual investors is displayed below.

If you own shares in a PIMCO fund managed by Gross, the big question is what should you do now? In situations when a manager leaves, the best move can be to sit tight and monitor the situation. If the fund(s) still meets your criteria for buying it, then don’t make a kneejerk reaction. Rather, see who takes over the fund and how that manager (or group of managers) performs relative to their category peers. Though likely to be less outspoken, the new manager(s) may prove to be as talented as or even more talented than Gross. They could also be worse. Until actual results begin to appear, nobody knows with any certainty how the funds will perform.

I realize that the advice to sit and monitor the situation can seem tough to follow. If you are uncomfortable doing so, go through the data in our fund guides. Look at the long-term performance of comparable funds, paying attention not only to the recent top performers, but also to those funds that have been able to best their peers over several years without experiencing considerably higher levels of volatility in their year-by-year returns. When doing this, be aware that bond market conditions going forward are likely to be different than they have been over the last five or 10 years. Pay attention to manager tenure, since the returns of a past manager don’t tell you how the new manager will perform. Don’t forgot to review the expense ratios as well, since every dollar spent on fees is a dollar you will never see again.

PIMCO Mutual Funds Managed by Bill Gross:

  • PIMCO Fundamental IndexPLUS Absolute Return (PIXDX)
  • PIMCO StocksPLUS Absolute Return (PSTDX)
  • PIMCO Small Cap StocksPLUS Absolute Return (PCKDX)
  • PIMCO StocksPLUS Absolute Return Short Strategy D (PSSDX)
  • PIMCO Low Duration (PLDDX)
  • AMG Managers Total Return Bond (MBDFX)
  • PIMCO Total Return (PTTDX)
  • PIMCO Unconstrained Bond (PUBDX)

PIMCO ETFs Managed by Bill Gross:

  • PIMCO Total Return ETF (BOND)

Closed-End Funds Managed by Bill Gross:

  • PIMCO Corporate & Income Opportunity Fund (PTY)
  • PIMCO High Income Fund (PHK)
 

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