Pimco's Mea Culpa

It ain’t easy carrying the weight of being the “world’s largest mutual fund” but that’s exactly the position Bill Gross finds himself in, ten months deep into a poor year for both absolute and relative performance (up 1% vs the benchmark up 4%).  Before I continue, by way of full disclosure I currently have both customer funds and personal funds in Pimco’s $242 billion Total Return fund, most people do.

Anyway, Pimco’s got an apology to their investors live on the site right now along with some thoughts on where things are headed both for the portfolio as well as the global markets…

Here’s my friend Jennifer Ablan for Reuters:

In a Special Edition letter posted on PIMCO’s website, Gross, who runs the $242 billion PIMCO Total Return portfolio, wrote that he underestimated the contagion effect from the Europe debt crisis and the U.S. debt ceiling debacle.

“As Europe’s crisis and the U.S. debt ceiling debacle turned developed economies toward a potential recession, the Total Return Fund had too little risk off and too much risk on…

“The simple fact is that the portfolio at midyear was positioned for what we call a “New Normal” developed world economy – 2.0 percent real growth and 2 percent inflation…

That’s all changed, of course. Gross said PIMCO’s internal growth forecast for developed economies “is now zero percent over the coming several quarters and the portfolio more accurately reflects this posture.”

Yes, you read that correctly, Gross is now more bearish on developed world growth prospects than he was in the summer, I wonder what he thinks of the massive spike in risk assets since October 3rd.  We know his cross-town rival Bond King Jeffrey Gundlach (of DoubleLine) thinks the recent rally has been a joke.

Source:

PIMCO’s Gross admits he struck out on bonds this year (Reuters)