The $50
billion Pimco Total Return fund (PTTAX ) isn't just the nation's largest
bond fund. It was also the best-selling overall mutual
fund in 2001, courtesy of Bill Gross's astute
management. His fund has returned 7.95% annually over the last five years,
beating 99% of its intermediate-term bond-fund peers, according to fund tracker
Morningstar.
No wonder the New York Times has named Gross "the nation's most prominent bond investor." Gross and his team have also been awarded Morningstar's "Fixed-Income Manager of the Year" award, twice. And in December 2001, SmartMoney magazine named Gross one of the 30 most influential people in investing.
Gross picks bonds based on long-term secular considerations, such as demographics, politics and structural changes in domestic and international economies. He sets a general maturity/duration range for a portfolio based on this long-term outlook. Shifts within this range are then determined by short-term cyclical trends. "Bill Gross does everything complicated," says Morningstar analyst Eric Jacobson. "He's more aggressive than most portfolio managers."
Gross made one of his best investment decisions — to load up on long-term Treasurys before the surplus-happy government started retiring them — during a lunch-time yoga class in January 2000. Over the next few weeks, he directed his traders to buy $5 billion worth of 20- and 30-year Treasury bonds. The idea soon caught on among other bond investors, and by year's end, Pimco bond funds had gained $200 million.
The strategist vehemently disagrees with the age-old adage that stocks always outperform bonds. In fact, he believes stocks will yield returns of around 5% over the coming decade. "Equity investors who envision double-digit gains into the next century for the majority of stocks are dreaming of sugar plums," he once wrote. This isn't to say that Gross thinks bonds will suddenly become the investment of choice. He recognizes that the best for bonds may have come and gone and expects total annual returns of 5% to 7% for the foreseeable future.
Often called the Peter Lynch of Bonds, Gross oversees more than $235 billion in total assets and is the author of two books, "Bill Gross and Investing" (1998) and "Everything You've Heard About Investing Is Wrong!" (1997). Gross, a one-time professional blackjack player, received his BA from Duke University and an MBA from UCLA Graduate School of Business. A founder of Pimco in 1971, Gross, 57 years old, is also a member of the Los Angeles Society of Financial Analysts.