Legendary Investor Bill Gross Declares “Total Return” Strategy Dead

Bill Gross, a pioneer of the “total return” bond strategy that revolutionized the bond market in the 1980s, has declared that the strategy is now “dead.” This is due to low interest rates and rising US debt.

What is the “total return” strategy?

Gross’s innovative strategy allowed investors to profit not only from the ongoing interest payments on bonds but also from capital appreciation as bond prices rose and yields fell. This strategy helped Gross build Pimco Total Return Fund into the world’s largest bond fund and earn him the nickname “Bond King.”

Why is the “total return” strategy no longer effective?

Low interest rates, which are hovering around 4.6%, limit the scope for bond price appreciation and make the “total return” strategy less attractive to investors. In addition, rising US debt is putting upward pressure on bond yields and downward pressure on bond prices.

Recommendations for investors: Don’t invest in bond funds

In the current environment of low interest rates and high debt, investors should consider alternatives to the “total return” strategy. Gross does not recommend investing in bond funds and advises looking for other investment opportunities that would help them achieve their investment goals.

Conclusion

The “total return” strategy, which once generated significant returns for investors, is now ineffective. Low interest rates and rising US debt are changing the investment landscape and forcing investors to seek new strategies to achieve their goals. Investors are therefore advised to consider alternative investment opportunities and consult with experts.

Who is Bill Gross?

Bill Gross: The “Bond King” who revolutionized investing with his “total return” strategy.

William Hunt “Bill” Gross (born April 13, 1944) is an American investor and fund manager, best known as co-founder of Pacific Investment Management Company (PIMCO).

His life and career:

• Born in Middletown, Ohio, he graduated with a degree in psychology from Duke University and an MBA from UCLA.
• Began his career in 1971 at Donaldson, Lufkin & Jenrette, where he analyzed corporate bonds.
• In 1973, he co-founded PIMCO, which quickly became one of the world’s largest investment firms.
• Under his leadership, PIMCO became known for its innovative investment strategies, particularly the “total return” strategy, which focused on maximizing returns from bond investments by combining ongoing interest payments with capital appreciation.
• He earned the nickname “Bond King” for his successes in the bond market and became one of the most influential investors in the world.
• In 2014, he left PIMCO and founded his own investment firm, Janus Capital Group.
• In 2019, he retired from active money management, but continues to invest and comment on the markets.

Family and personal life:

• He is married to Amy Schwartz Gross and has three children.
• In 2016, he divorced his previous wife Sue after 31 years of marriage.

Achievements and awards:

• Co-founded PIMCO, one of the world’s largest investment firms.
• Architect of the “total return” strategy, which generated significant returns for investors.
• Earned the nickname “Bond King” for his successes in the bond market.
• Multiple winner of the Morningstar Fixed Income Manager of the Decade award.
• Member of the Investment Hall of Fame.

Interesting facts:

• He is a passionate philanthropist and supports various charitable organizations.
• He collects stamps and owns the world’s largest stamp gallery dedicated to philately at the Smithsonian National Postal Museum.
• In 2015, he sued PIMCO for wrongful termination and the lawsuit was settled in 2017 for $81 million.

Bill Gross is undoubtedly a legend in the investment world and his innovative strategies have influenced millions of investors. Even though he is no longer actively managing money, his market commentary is still closely followed.

Sources:

• Wikipedia: Bill Gross
• Investopedia: Bill Gross
• Bloomberg: Bill Gross
• Photo: Loic Le Meur Flickr