Bill Gross has taken on a new role for asset managers: real life stress test.

Stephen Foley and Barney Jopson of the Financial Times report that both BlackRock [profile] (the largest asset manager in the world) and Fidelity [profile] (the second-largest mutual fund shop and the largest retirement plan recordkeeper) both pointed to the non-crisis wake of Gross jumping ship as a stress test of asset management. Gross left, and the bond fund world didn't end.

Barbara Novick, vice chairman of BlackRock, wrote to the U.S. Financial Stability Oversight Council (FSOC) and called the months after Gross' move "a good example of the ability to transition large amounts of assets from one manager to another without market disruption." Fundsters have been pushing back against the possibility of the FSOC stepping in to regulate large asset managers as "systemically important financial institutions." Novick even expressed support for stress tests.

The question is how the FSOC sees the Gross example, and how broadly they see it applying. Worries about bond funds remain, especially in terms of liquidity in the midst of a rise in interest rates or some other market shift. Former FDIC chair Sheila Bair, now head of research Systemic Risk Council, wants more data and worries that the Gross fallout was not indicative of what could happen to "a highly leveraged fund ... in a 'fire sale.'" 

Edited by: Neil Anderson, Managing Editor


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