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Bill Gross: 'I was a better portfolio manager being constrained'

Sam Ro
Managing Editor

Bond fund pioneer Bill Gross is retiring from the industry, leaving his most recent position as manager of the Janus Henderson Global Unconstrained Bond Fund.

Gross, who was the co-founder of PIMCO, joined Yahoo Finance’s “The Final Round” by phone on Monday to discuss his legacy, aspirations, and of course outlook for the bond market.

“My legacy, as I see it, would be one in which I was an explorer and innovator, a risk taker and willing to move into new markets that now are very well established,” Gross said.

And this is more than just mere braggadocio. In his 40+ years in the industry, he helped lead the transformation of how people think about investing in bonds.

“A legendary investor, Bill Gross leaves behind him a long history of fixed income innovation and performance,” tweeted Mohamed El-Erian, who was formerly CEO and co-CIO of PIMCO during Gross’s tenure at the firm. “Many of his portfolio approaches and analytical frameworks continue to be used today by investors around the world.”

At its peak, PIMCO’s Total Return Bond Fund ballooned to $292.9 billion under Gross’s purview. Nevertheless, Gross looked back at his most recent years with humility.

“After I left PIMCO, I wanted to continue to demonstrate that I could outperform in an unconstrained type of portfolio,” he said. “Looking back over my 30 or 40 years, I was a better portfolio manager being constrained.”

Gross’s performance at Janus was anything but that. His fund saw assets peak at $2.2 billion. But underperformance led to outflows. Earlier this year, assets dwindled to less than a billion.

Bill Gross poses for a photograph in the PIMCO office in Newport Beach, California, U.S., on February 27, 2000. (Marc Salomon/Bloomberg via Getty Images)

“I probably would’ve called it a day a few years ago,” he said when asked if he had any regrets. “Being the risk-taker that I am... I decided to give it a go. It didn’t work out that well.”

Bill Gross’s outlook for the bond market

Being a bond expert, Gross offered his outlook for the bond market.

He pointed to the tensions pushing and pulling at rates. Specifically, he identified the Federal Reserve as being “aggressive” in its tightening of monetary policy, reflected by a fed funds rate being raised to 2.5%, up from 0% in December 2015.

However, he also pointed to reasons why rates wouldn’t be going much higher in the near term.

“I’d say the 10-year [U.S. Treasury yield] moves higher, probably not higher than 3.0%,” he said. “I think 2.70% is a little low. I don’t think it could go higher than 3.0%.”

One question that Bill Gross’s fans and followers have: Will he continue to write regularly?

“I hope so,” he said.

Sam Ro is managing editor at Yahoo Finance. Follow him on Twitter: @SamRo

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