Bill Gross’ PIMCO Departure – 4 Strategic Wealth Management Lessons

With much fanfare and a great deal of press, legendary bond investor Bill Gross shockingly announced his resignation from PIMCO on September 26, after 43 years with the company. Known as the “Bond King” for his track record managing the $222 billion PIMCO Total Return fund, Gross was leaving the company he helped found in 1971 and that he grew into a $2 trillion behemoth.¹

Whatever the reasons behind his departure, it gives investors good reason to ask an important question: when the portfolio manager leaves a fund, should you remove your investments from the fund? The four considerations outlined below will help answer this important question.

4 Lessons Learned from Bill Gross’s PIMCO Departure

1) Wealth Management Strategies Are Only as Good as their Management Teams

Bill Gross had a team supporting his investment process, but the fund’s biggest decision-maker is now gone. This is likely a main reason some $10 billion left the fund following his announced departure and why some analysts estimate an additional $100+ billion could follow. In addition, many institution investors are doing the same,² such as Ford Motor Corp. announcing it was removing PIMCO Total Return from its retirement plans.³

Lesson: Future expected returns can be thrown into question when the main decision-maker leaves. Your financial advisor should consistently review the management teams for your investments and make adjustments to your investment plan if needed.

2) Funds and Portfolio Managers are rarely the Best for All Time

The Wall St. Journal recently penned an article citing a Morningstar study that found 86% of the five-star funds from 10 years ago no longer held those five stars today. Sometimes a fund gets too big, a critical decision-maker leaves or the investment strategy simply loses its luster.²

Lesson: In addition to the lesson above, your financial advisor should also constantly evaluate your money manager’s investment philosophy and their ability to continue to meet your investment objectives.

3) The Importance of Monitoring All Management Teams

The high-profile exit of a money manager like Bill Gross gets a lot of press coverage, but what about when the managers of lesser known, high-quality funds leave?

Lesson: Make sure your financial advisor is watching for changes in management teams with all of your investments, not just the big names and names in the news.

4) It’s Time to Check Your Investment Portfolio for Management Shake-Ups

Many investors’ retirement plans have exposure to PIMCO given that they have $100 billion in 55,000 defined contribution plans.¹ Checking your portfolio may expose other funds where the management has changed, meaning you may need to change too.

Lesson: It’s important to review your portfolio with your financial advisor at least quarterly to ensure that the investment plan you have in place is still working for you.

Talk to a Wealth Manager About Your Investment Plan

It’s important to find a financial advisor who can proactively makes you aware of management changes and offer alternatives when necessary.

Call one of our Wealth Managers today at 1-800-541-7774 to review your current investments, learn about our strategic wealth management strategies and create an investment plan. You can also get started on your own comprehensive investment plan by answering a few questions here.

By Michael J. O'Connor, CWS^®

Michael is a Certified Wealth Strategist and Wealth Manager at WrapManager, Inc.

Sources:

1 The Washington Post

2 Wall Street Journal

3 Reuters