Bill Gross – the 71-year old hostile foreigner bond king – apparently got spanked on Black Monday, the Wall Street Journal reports, losing nearly 2.9% of the Janus Global Unconstrained Bond fund’s net asset value in just a single day. Which begs the question: what is going on there?
A single day loss of that magnitude is typically unheard of for a bond fund, as Bradley Alford, Alpha Capital Management’s CIO told the Journal:
“I have spent 25 years investing with managers across every asset class, and I don’t think I have ever seen a bond fund drop almost three percent in one day.”
Taking a quick gander at the fund’s latest disclosure, it appears that most of his positions should’ve been winners. He’s long pit-traded 10-year note futures, which should’ve helped him a lot back then, and he also holds CDS protection on Brazil, which should’ve spiked well into the money given the nation’s recent crisis.
The culprit may be his short position on September Eurodollar futures – his largest position – though its 0.6% climb on Black Monday doesn’t seem enough to dissolve 2.87% of his fund’s value. Unless of course, he levered it up to the hilt.
We could be way off the mark here though, Gross’ latest disclosure is grossly outdated, so whatever he did to wipe out that chunk is still up to speculation.
What’s clear however is that Gross is not having a good year; his fund has constantly been posting outflows and according to Morningstar, he’s been lagging the Barclays aggregate bond index by almost 2% year to date.
Photo: Janus