The Financial Time’s “Lunch with the FT” is usually good for a few compelling anecdotes, particularly when they’ve got a good guest. And when it comes to consumable soundbites, there are few better than Bill Gross.
Fresh off a series of staggering post-retirement revelations, including telling Bloomberg that he had recently been diagnosed with Asperger’s, a form of autism, after reading about the symptoms experienced by hedge fund manager Michael Burry in the book “The Big Short”, Gross sat down with the FT’s US markets editor Robin Wigglesworth for a roving discussion about how Gross decided to pursue a career on Wall Street, the early days of Pimco, his ouster from the firm he built, his tabloid divorce, what it was like working with millennials and his plans for retirement. A common theme throughout the conversation was how Gross’s Asperger’s – and his insatiable lust for fame – influenced his decision-making.
As Gross puts it:
“I wanted to be famous because I wanted to be loved…pursued that obsessively,” he reflects at one point. “Shit, that’s why I’m talking to you today.”
Wigglesworth filled the interview with amusing color about Gross’s mannerisms, including his penchant for stabbing the air with his fork as a point of emphasis, and Gross’s order of his “usual” – what Wigglesworth described as “an unremarkable looking” tuna melt, which he didn’t finish.
Below, we’ve broken down a few key points:
His “defenestration” from Pimco:
While it likely contributed to his investing success, Gross suspects that his undiagnosed Asperger’s helped create some of the interpersonal friction with his senior managers that ultimately led to his ouster from the firm. Gross didn’t want to leave, and even suggested a demotion to some more minor role, but after the departure of Mohamed El-Erian, the firm’s other senior employees had apparently had enough of his shit.
At the end, Gross “was begging like a mongrel…I wanted to stay at Pimco…it was my family.”
He attributes his fall from grace at Pimco partly to his undiagnosed Asperger’s, which made him a “singular, dominating, angry, quiet, introverted person”. As Pimco grew bigger, and the average employee became younger, his “style of speaking my mind in a non-friendly way” started to cause friction. “Millennials like to hear good things, not bad things,” he says. Things came to the boil in 2014, when Mohamed El-Erian, Pimco’s chief executive and a vital Gross shock absorber, abruptly quit.
A subsequent rash of stories blamed El-Erian’s exit on the founder’s increasingly difficult behaviour – which in turn sent Gross on a witch-hunt for media leaks. Ultimately, faced with a possible exodus of frustrated senior fund managers, Pimco’s executive committee instead decided to oust Gross.
Gross offered to take on a reduced role. “I was begging like a mongrel, sniffing for titbits on the ground…I just wanted to stay at Pimco, it was my family,” he says, alternating between anger and sadness. “They looked at me, and said no…So I called up Janus.”
The early days of Pimco:
Gross’s big innovation after joining Pacific Mutual Life was to disrupt the staid world of fixed income with an aggressive style of trading, which helped Pimco earn a reputation as a bunch of “badasses” looking for “every penny we could find.”
The business came of age in an era of excess, but where the culture of Wall Street was reputedly fuelled by drink and drugs, Gross insists he never saw anything troubling at Pimco. Their main high, he says, was sugar – especially M&M’s. “It gave us all the false courage in the world to take on dealers and tell them to go f*** themselves,” Gross recalls wistfully, as he tucks into what looks like an unremarkable tuna melt.
Active, aggressive bond investing was Gross’ big innovation. Historically, insurers and pension funds were the big buyers of bonds. They rarely traded – in fact bonds were typically kept in a vault, and selling meant physically mailing them to the buyer – and enjoyed cordial, clubby relationships with Wall Street. Pimco, on the other hand, actively traded in and out of positions, expanded assertively into hot new areas like junk bonds and emerging markets, and used its increasing clout to cudgel banks into giving them better bids.
“Back then [we were] known as badasses. Between banks and insurers there was a friendly atmosphere, but we were definitely not friendly. We were looking for every penny we could get,” Gross says. The result was an investing empire that peaked at $2tn of assets under management in the wake of the financial crisis, which Pimco navigated with aplomb.
His messy tabloid divorce
Looking back, if Gross could re-do his divorce from his second wife, Sue Gross, after their 30-year marriage fell apart, there are a few things he would do differently…like maybe he wouldn’t have filled the house that went to his ex with fart spray. The acrimony has led to serious repercussions in his personal life: For example, he wasn’t invited to his son’s wedding in Italy.
Unfortunately, his private life offered little respite from the professional turmoil. In 2017 he split up with his second wife of over three decades, Sue Gross. The divorce was played out in the tabloids, reaching a tragicomic nadir with allegations that Gross had filled a house that went to his ex-wife with “fart spray”.
Gross admits this is true, but claims he was only responding in kind to what his ex had allegedly done to another home that he was taking over. “So I went to a drugstore and found smelly shit,” he says. “I don’t know why I did that. It got very ugly. It’s still ugly.” He quietly reveals that things are now so bad that he wasn’t invited to their son’s wedding in Italy — indeed he only found out about it from his dental hygienist. The downbeat turn in conversation clashes awkwardly with the clinks of wine glasses and chatter from a handful of wealthy Newport Beach “golf widows” lunching nearby.
Working with millennials
Among the factors that contributed to his fall from grace at Pimco, Gross included one big surprise. His management style didn’t exactly jive with millennials.
He attributes his fall from grace at Pimco partly to his undiagnosed Asperger’s, which made him a “singular, dominating, angry, quiet, introverted person”. As Pimco grew bigger, and the average employee became younger, his “style of speaking my mind in a non-friendly way” started to cause friction. “Millennials like to hear good things, not bad things,” he says.
His failures at Janus
After leaving Pimco, Gross sought to quickly revive his reputation by joining Janus Henderson, a much smaller rival. As anybody who has been following his exploits over the past few years probably already knows, that didn’t go so well. After a few years of sub-par returns, Gross announced his retirement earlier this year, marking an ignominious end for a man who had been one of Wall Street’s biggest luminaries.
One of the biggest factors that led to his downfall? Gross says he was hungry to prove himself outside Pimco and as a result took too much risk with his “unconstrained” investing strategy.
Unfortunately, his time at Janus Henderson provided no salvation. Desperate to prove that his golden touch hadn’t disappeared, Gross admits he ignored the lessons of a lifetime and took excessive risks with his new fund. It started out reasonably well, but suffered a 3.9 per cent loss last year, underperforming his benchmark and most other bond fund managers.
“I lost my bearings,” he says. “I wanted to prove that I could still do it, and do it quickly.” He wonders aloud whether it would have been better for his legacy if he had simply bowed out quietly from Pimco. “Eventually, as the Coldplay song goes, who would ever want to be king?” he says. His brain might tell him his legacy is intact. “But as you’ve observed, the emotional side of me says ‘people don’t love me any more’.”
But while Gross has certainly taken his fair share of blows in recent years, there is still much for him to find comfort in, as Wigglesworth readily notes. Gross followed up his lunch with a round of golf with his new girlfriend – a retired pro tennis player – and later departed for a retirement trip to Bora Bora.
Even though he’s no longer “the Bond King”, life is still pretty good.
via ZeroHedge News https://ift.tt/2VL4dsH Tyler Durden