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Monday, January 07, 2013

Is Gross Managing Too Much Money?

News summary by MFWire's editors

Maybe too much money is a bad thing after all.

At least, that is the argument that Kiplinger columnist Steven Goldberg is making about Pimco's [profile] Bill Gross.

The Kiplinger writer notes that the Gross' Total Return fund is the largest on the planet, with $285 billion in assets. From its inception through December 31, it returned an annualized 8.4 percent, beating the Barclays U.S. Aggregate Bond index by an average of 1.1 percentage points per year. In all, his firm now oversees a total of $1.9 trillion, according to Goldberg.

And that's the problem, he writes.

Goldberg has this to say about the fund:
Gross's very success has made it less likely that Pimco Total Return will shine as brightly in the future. If you own it, I recommend selling it. In my view, Total Return will be hard-pressed to perform better than the average bond fund in the future.

Goldberg has two qualms about the fund: one involves what may happen next in the bond market, while the other is the size of the fund itself and the size of "Gorss' empire."
As Goldberg puts it:
The bigger problem is that Gross is managing too much money. Way too much.
He notes that the Pimco Total Return ETF, launched in 2012, has been "beating the pants off its mutual fund cousin." In the second and third quarters, the mutual fund returned 6.0 percent, while the ETF, which began with $100 million in assets, has returned 8.3 percent.

Read more of his analysis here.  

Edited by: Tommy Fernandez


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