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FYI: This weekend, thousands of institutional investors, financial advisors and wealth managers are faced with one of the most uncomfortable questions imaginable: Do we need to fire Pimco? Regards, Ted http://thereformedbroker.com/2014/09/28/do-we-need-to-fire-pimco/
While I like the column (especially his discussion of Gross' ill-fated, well-publicized wrong call on Treasuries), there are still a couple of errors in basic facts.
Vanguard has the largest mutual fund (Vanguard Total Stock Market Index), but Pimco Total Return Bond Fund at $221B (still, at least as of August) is far and away the largest bond fund. Vanguard's Total Bond Market Index Fund is a distant second at $122B. (Per M*). We'll have to see what the end of month figures show.
Given that boomers were born between 1946 and 1964, most saw their first real stock market losses of their adult lives not in 2000, but when the market plunged 22% on a single day in 1987 and the market lost 1/3 of its value in three months. But since Gross' Total Return Bond Fund had barely begun then (it started in Spring 1987), that loss wouldn't have advanced the storyline here.
@msf: According to each funds website: Vanguard Total Stock Market Index Fund has assets of $361.2 billion , while Pimco Total Return Bond Fund has $221.6 billion. Regards, Ted
The article said that Vanguard was "home of the world’s largest bond fund". Unless you're suggesting that the Total Stock Market Index Fund is a bond fund (and I don't think you are), the article is wrong.
It seems I neglected to point out what the error in the article was - the data I provided was pretty useless without knowing why I provided it. Sorry about that.
I not only disagree with this Josh Brown, some of what he is saying is total BS. Take a look at the chart of PTTRX right after Gross made the call. There is a marked difference away from the aggregate bond index, but following that a marked difference toward the index. What about all the correct calls Gross made for so many years?
Everyone is an "expert". They know the "one thing" that caused Gross' downfall. Assets went down from 290B to 220B, right? WTF made assets go up to 290B in first place? Gross had nothing to do with it?
Let's be honest here. Gross may not have been Puss N Boots, but no one had any trouble with him as long as PTTRX assets, if not its performance were in an upward trajectory. I would hardly call Gross an underdog, but I'm starting to think he was not the only "problem" at PIMCO. They can't say "we were already contributing to the investment decisions" AND then also blame Gross completely for his "bad call" on treasuries. This is the same as capitalizing profits and socializing losses. Not to mention, all individual investors are idiots for chasing performance, but when institutions do it after Gross's "bad call", there is no focus on it.
I'm sticking with Robert Arnott for PAUDX in the IRA. I've already reduced my PTTRX stake to 50% of what it was in the 401k. I'm putting my PGMDX stake in IRA on notice. El Erian didn't do diddly here because he was allegedly cleaning up Gross' s*** that he was tired of doing, instead of cleaning his own. Now that I learn Mihir Worah is a nuclear physicist, it might be prudent to look for manager with PhD in finance. Not to say I have anything against physicists, but I typically don't hire them to manage my money.
I don't grasp why institutional groups would bail out of PTTRX at this point. If they were acting on their fiduciary responsibilities, they would have bailed 2-3 years ago. That is when bad calls and blooey commentary really started to affect the fund. And my guess is that very few of these fiduciaries could enumerate the derivative trading that Mr. Gross used. They simply accepted it. Perhaps the proper response would be to put the fund on watch for 6 months.
The real test will be if these so-called fiduciaries follow Mr. Gross to Janus. How will they explain/justify moving to a company with a former history of corruption. At least PIMCO has been pretty clean in that regard.
It has always amazed me that so many of our client's employer 401k plans have had PTTRX as the ONLY fixed-income option. DUH!
Comments
Vanguard has the largest mutual fund (Vanguard Total Stock Market Index), but Pimco Total Return Bond Fund at $221B (still, at least as of August) is far and away the largest bond fund. Vanguard's Total Bond Market Index Fund is a distant second at $122B. (Per M*). We'll have to see what the end of month figures show.
Given that boomers were born between 1946 and 1964, most saw their first real stock market losses of their adult lives not in 2000, but when the market plunged 22% on a single day in 1987 and the market lost 1/3 of its value in three months. But since Gross' Total Return Bond Fund had barely begun then (it started in Spring 1987), that loss wouldn't have advanced the storyline here.
Vanguard Total Stock Market Index Fund has assets of $361.2 billion , while Pimco Total Return Bond Fund has $221.6 billion.
Regards,
Ted
It seems I neglected to point out what the error in the article was - the data I provided was pretty useless without knowing why I provided it. Sorry about that.
Everyone is an "expert". They know the "one thing" that caused Gross' downfall. Assets went down from 290B to 220B, right? WTF made assets go up to 290B in first place? Gross had nothing to do with it?
Let's be honest here. Gross may not have been Puss N Boots, but no one had any trouble with him as long as PTTRX assets, if not its performance were in an upward trajectory. I would hardly call Gross an underdog, but I'm starting to think he was not the only "problem" at PIMCO. They can't say "we were already contributing to the investment decisions" AND then also blame Gross completely for his "bad call" on treasuries. This is the same as capitalizing profits and socializing losses. Not to mention, all individual investors are idiots for chasing performance, but when institutions do it after Gross's "bad call", there is no focus on it.
I'm sticking with Robert Arnott for PAUDX in the IRA. I've already reduced my PTTRX stake to 50% of what it was in the 401k. I'm putting my PGMDX stake in IRA on notice. El Erian didn't do diddly here because he was allegedly cleaning up Gross' s*** that he was tired of doing, instead of cleaning his own. Now that I learn Mihir Worah is a nuclear physicist, it might be prudent to look for manager with PhD in finance. Not to say I have anything against physicists, but I typically don't hire them to manage my money.
The real test will be if these so-called fiduciaries follow Mr. Gross to Janus. How will they explain/justify moving to a company with a former history of corruption. At least PIMCO has been pretty clean in that regard.
It has always amazed me that so many of our client's employer 401k plans have had PTTRX as the ONLY fixed-income option. DUH!