Bill Gross is the global guru of the bond fund world. He put the world of fixed income centre stage and educated millions of retail individuals - and sophisticated institutional investors - to appreciate the workings of the fixed income market and the opportunity to earn decent rates of return from investing in "boring bonds". As one of the founder of PIMCO - later acquired by global insurance giant Allianz in 2001 - Bill Gross was the fund manager of The Pimco Total Return Fund, the largest bond fund in the world which has over USD 200 billion of client assets and has - since its launch in 1987 averaged a rate of return of 7.9% per annum v/s 6.8% per annum for the relevant index. While the Fund's stellar performance earned Bill Gross his superstar status - giving him the same level of publicity granted to a Warren Buffet and Peter Lynch from the equity world - the performance of the Fund has slipped recently. Clients had started leaving the Fund.
On September 26, Bill Gross stunned the world by quitting Pimco/Allianz and joining the equity fund house of Janus, which is keen to build its "business" of bond products.
Sorry, Bill, no job for you!
Despite his stellar background, if Bill Gross had bothered to send us a resume - we would never hire him. To clarify, I doubt a star like Bill Gross even knows who we are - and even if he did, we would not be able to afford him ☺
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And here are 3 reasons why we would never hire someone like a Bill Gross:
In the short run, stars attract money and flows and all the goodies and higher bonuses that come with those flows.
- Bill would be a misfit at Quantum AMC and would be a risk to the culture we have diligently built as managers of the Quantum Mutual Fund. While we love having intelligent people join us - we don't encourage any sort of "superstar" status. Sure, every business needs a "face" and while I may have been the "face" of Quantum AMC in the initial years, Subbu has increasingly been presenting at our 'Path to Profit' meets - which our passionate appeals for rational, long-term investing. As many attendees of the pulsating 'Path to Profit' meets know, there are many occasions when the fund managers are the main speakers and neither Subbu nor I are there. We don't believe that all knowledge and genius should lie (or does lie) in one or two people. We don't like stars. We love groups who can think collectively, build processes, and work for the benefit of our investors.
- Our view on investments is generally focused on the long term. While all individuals eventually die, processes can stay on forever. Henry Ford died but his contribution to modern production systems stayed on forever - and has been improved along the way. Sometime bad processes can perpetuate forever, too. Indira Gandhi died, but her contribution of encouraging her party men to focus more on "what's in it for them or the Party" rather than what's in it for the country, has lasted longer than the Congress Party has. And, as occupant number 7402 of Parapanna Agrahara Central Prison in Bangalore proves, this "mera desh, mera peyt" attitude has been widely adopted by every regional and national political party and politician populating the raped Indian landscape. The point is that Bill Gross never spelled out his process and named his successors. It does not look like he shared the stage with them - or push them in front of TV cameras while he faded away to the background. Individuals who invest in a Fund because of the genius of one man or the "star fund manager" bear the risk of that man losing his skill (Bill Gross had poor numbers recently though, admittedly, even team-led processes can have poor numbers). The other risk is that a person will die and leave no successor. Or a star may leave the Fund for some other fund house. While genius can create, process can procreate for the long run.
- Bill Gross may be brilliant. But, in addition to the obligation to his clients to build a succession plan, he had an obligation to those who worked with him and for him to teach them what he knows. Those with knowledge need to share with those with less knowledge but a hunger to learn. The best teacher is the one who makes the students smarter than her. Star fund managers don't get this part of the "deal". They are self-centred. Because they wish to remain stars, they will never allow smart people to rise and achieve a higher status than they have - ever. This is dangerous for the investor - and the fund management company that hires them. The younger, more energetic raw talent will prefer to join a fund house that has a process of mentoring.
But this is of little interest to us at Quantum AMC.
If Bill Gross had a brilliant track record as a creator and builder of teams, we would have a serious discussion with him about joining us and helping make our fixed income team even better than what we believe it to be today.
But brilliance - matched by a desire not to train the next generation in good practices and principles of investing - is a cocktail for disaster.
Sorry, Bill - no room for you here at Quantum.
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Suggested allocation in Quantum Mutual Funds (after keeping safe money aside)
||Quantum Long Term Equity Fund
||Quantum Gold Fund
(NSE symbol: QGOLDHALF)
|Quantum Liquid Fund
|An investment for the future and an opportunity to profit from the long term economic growth in India
||A hedge against a global financial crisis and an "insurance" for your portfolio
||Cash in hand for any emergency uses but should get better returns than a savings account in a bank
||Keep aside money to meet your expenses for 6 months to 2 years |
Disclaimer: Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"