The investor that lost control of his own firm

Bill H. Gross co-founded PIMCO in 1971 and built it into one of the largest bond managers in the world, overseeing more than $1.9 trillion in assets. He was the face of fixed income, the creator of the Total Return Fund, and a regular presence on CNBC. But in 2014, after decades at the top, he suddenly left the firm he built, driven out by internal conflict and a sharp decline in performance.

This week, we explore how Gross became the most influential bond investor in the world and how it all unraveled in a very public split:

• 🏛️ Building PIMCO into a giant

• 💥 The public dispute & departure

• 📉 The slowdown and the retirement

— Investor Briefcase Team

Bill Gross started PIMCO in 1971 with just a few million dollars under management. He had a background in psychology, an MBA from UCLA, and a stint as a professional blackjack player in Las Vegas. He applied the same probabilistic thinking to bonds, popularizing active bond management at a time when most investors bought and held fixed income securities.​

Gross's approach was aggressive. He used derivatives, made big bets on interest rates, and wasn't afraid to take contrarian positions. His flagship fund, the Total Return Fund, became the largest bond fund in the world, peaking at nearly $293 billion in assets.

Under Gross's leadership, PIMCO became one of the most influential firms on Wall Street. The firm advised the U.S. Treasury during the 2008 financial crisis and played a key role in the government's efforts to stabilize the economy. Gross's insights were sought after by policymakers, and his market commentaries were widely followed by investors. His success earned him the nickname "The Bond King," and he was named Morningstar's Fund Manager of the Decade in 2010.

Despite his monumental success, Gross’s relationship with his firm started to fall apart in the early 2010s. The Total Return Fund underperformed, and investors started pulling out billions. Internal tensions at PIMCO escalated, particularly between Gross and then-CEO, Mohamed El-Erian, creating a rift within the firm. Gross's management style was described by some as autocratic, leading to a toxic work environment.​

El-Erian left the firm in early 2014, and Gross followed in September, resigning unexpectedly. He later filed a lawsuit against PIMCO and its parent company, Allianz, alleging that a "cabal" of executives had conspired to oust him to claim his share of the firm's profits. The lawsuit was settled in 2017 for $81 million, which Gross pledged to donate to charity.

The departure led to significant outflows from PIMCO's funds, with the Total Return Fund experiencing billions in redemptions. The firm's reputation took a hit, and the incident served as a cautionary tale about the risks of a star manager model in asset management.

After leaving PIMCO, Gross joined Janus Capital (now Janus Henderson) in 2014 to manage the Global Unconstrained Bond Fund. He invested $700 million of his own money into the fund, aiming to replicate his previous success. However, the fund's performance lagged, with annualized returns of less than 1% and rankings near the bottom of its peer group.

Gross attributed the underperformance to the low-interest-rate environment and market distortions caused by central bank policies. He also acknowledged making some poor investment decisions, including a bet that German and U.S. government bond yields would converge, a position that failed to play out as expected.

In 2019, Gross announced his retirement from active fund management to focus on managing his personal assets and philanthropic endeavors. Over his career, he has donated over $700 million to various causes, including education, healthcare, and the arts.​

Gross's legacy is a complex one. He built one of the most successful asset management firms in history and yet, his career also serves as a reminder of the challenges that come with fame, power, and the pressures of maintaining success in the ever-changing world of finance.

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Other finance figures with public fallouts

> Michael Burry: After achieving fame for predicting the subprime mortgage crisis, Burry clashed with investors in his firm, Scion Capital, over his contrarian bets and communication style. The tension ultimately led to him shutting down the fund in 2008.

> Bill Ackman: Known for his activist campaigns, Ackman had a bitter and public fallout with Target Corporation and later faced internal and investor backlash after his failed multi-year short position against Herbalife, which strained confidence in Pershing Square.

> Peter Thiel: Though better known as a tech investor, Thiel clashed with the board of Facebook (now Meta), where he was an early backer and director. His eventual exit followed disagreements over the company’s direction and his growing political involvement.

Each week we profile the most notorious investment stories.

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