Bill Gross is fascinating. He’s a brilliant, volatile wild card with below average people skills who happens to sport a four-decade money management record that would elicit envy from anyone in the bond world. But he was coming off a bad year in which he made some poor investment choices. The combination of his unique personality and those circumstances led to his demise at Pimco, a story that continues getting fleshed out.
Bloomberg just published an in-depth piece that chronicles Gross’s final year at Pimco, a company that he founded but eventually walked away from knowing the guillotine was soon to drop. The piece is worth a full read, but here are some of the highlights that weren’t public as of yesterday.
The main takeaway is that Gross offered to take a step back, although not step down, on more than one occasion. That option was actually being considered until he essentially blew up, became paranoid, tried to fire a bunch people who he wasn’t authorized to and yelled a whole lot.
The first time he offered to step back was when his number two, Mohamed El-Erian, informed the firm that he was going to resign. This was after Gross agreed to hire a mediator to help mend their relationship (is that something that actually happens?) but then backtracked and said he never agreed to a mediation session even though one was already scheduled. El-Erian left and Gross remained at the helm.
Another highlight, if you will, is that the media coverage of Pimco and Gross –including reports that he wouldn’t let subordinates make eye contact and once referred to himself as Secretariat – played a major part in his downfall, according to Bloomberg.
The rather granular reporting by the Wall Street Journal and other outlets led Gross to believe he had a mole in the upper ranks who was running to the press. He spent a great deal of the last year chasing “Mr. X,” a person within the firm who was trying to sabotage him, he later told DoubleLine Capital Jeffrey Gundlach. One suspect was a former journalist, the other a managing director who declined to rise during a standing ovation that followed a Gross speech in which he blasted El-Erian.
[efc_twitter text="He interrogated nearly everyone with any clout, carried around a three-ring binder with emails and notes on his findings "]and eventually tried to fire both suspects on more than one occasion. He was told no, and, after calling Reuters to blame El-Erian for the bad press and an embarrassing interview on Bloomberg Television, Gross was suspended from media appearances indefinitely, according to the report, provoking an outburst.
Typically always assertive, Gross even took to passive aggressive strategies like sitting Mr. X along the side of the conference room rather than at the main table. He was also seen screaming at Pimco CEO Douglas Hodge and President Jay Jacobs but later claimed that he staged the event to intimidate others who were watching.
Knowing his time was up, Gross abruptly quit, but not before arriving shy of 5 a.m. on his last day to place notes on the desks of some of his employees. “Keep doing a great job. Look after her,” he said of Pimco. He was on a plane headed to his new employer, Janus Capital, before most even arrived at work.
All in all an interesting way to go out.
Traits of Goldman Hires (eFinancialCareers)
What makes Goldman's sales and trading juniors so special? We’ve listed ten of them so that you can benchmark yourself against their achievements.
HFT Firms Eyeing Growth Plans (eFinancialCareers)
While controversial, high frequency trading firms are still growing. At least three are looking for traders in London.
Credit Suisse Sued Over Loan Strategy (WSJ)
Emails from over 10 years ago may come back to haunt Credit Suisse. As part of a lawsuit involving the bank, lawyers have dredged up emails in which U.S. employees discussed appraising property based on future expected revenue, rather than traditional methods, which may have led to steeper real estate losses for its clients.
RBC Preps for Volcker Rule (Bloomberg)
RBC has exited roughly half its proprietary-trading strategies as it looks to comply with the Volcker rule. Job losses were expected to be minimized as the bank was planning on spinning off its U.S. prop trading business into a hedge fund, but it scrapped those plans in October.
Note: Don’t Invest With a Teddy Bear Collector (Bloomberg)
Hedge fund manager Paul Greenwood has been sentenced to 10 years in prison for running a Ponzi scheme. Greenwood became well known for spending his fraudulent gains on one of the biggest “museum-grade” teddy bear collections in the world.
Potential Cost Cutting at BNY Mellon (Financial News)
Activist investor Trian Fund Management has been given a board seat at Bank of New York Mellon. Trian has been pushing for the firm to cut costs, so you can expect that to be a priority going forward.
Institutional Investors Pushing Back on Fees (Bloomberg)
Large shareholder groups that are sick of high fees and mediocre returns are discussing plans to help remold the hedge fund pay model. Proposals include requiring funds to hit minimum return thresholds before charging fees. For most hedge funds, the 20 and 2 model is no longer an option.
Buzz Around the Office
A research lab at the University of Texas is missing roughly 100 brains. If you have seen them, give a holler.
Quote of the Day: “I’m not especially known for people management. I am learning.” – Bill Gross