Posts filed under “Hedge Funds”

Proof the Bond Bull is Over: PIMCO Selling Hedge Funds

If you have been seeking unequivocal proof that the 30 year bull market for bonds is over, look no further than this WSJ headline: Bond-King Pimco Plans to Push ‘Alternative Funds’.

Think about what this means: From 1980 to 2013, PIMCO enjoyed three decades of rising bond prices — read falling interest rates — and accumulated a massive pool of over $2 trillion in assets under management (AUM). Founded in 1971, the firm rode the bond Bull better than anyone else. The bond bull also led them to manage the world’s largest mutual fund, their Total Return Fund, which has amassed $242.7 billion in assets.

To me, the fact that PIMCO is embracing alternative investments signals the end of the bond bull market. While some folks may want to blame a change in culture due to Allianz acquiring PIMCO, let me remind you that was almost 14 years ago.

The WSJ notes the impact of the hilariously misnamed JOBS Act:

“Douglas Hodge, Pimco’s chief operating officer, called alternative investments “a very important area for us” in an interview with The Wall Street Journal. He said the firm is responding to increased demand from investors of all types, as well as to changing regulations.

But the push into riskier, more-complex products marks a shift for the firm, whose bond funds have long been seen as some of the safest and most reliable on the market.

The SEC moved last month to lift a restriction prohibiting hedge funds, private equity firms and other businesses from publicising shares in private offerings as part of the Jumpstart Our Business Startups Act, effective September 23. That allows Pimco and others to pitch alternative products more directly to institutional investors as well as wealthy individuals.”

I thought PIMCO had jumped the shark when Bill Gross blackmailed Treasury into guaranteeing Fannie & Freddie’s paper. Note that these were not government owned entities but rather were publicly traded firms. The implied guarantee was forced to become an actual guarantee, costing taxpayers 100s of billions of dollars so far.

bill-grossWith their foray into hedge funds, any suspicion you may have had that the bond bull market was in the 9th inning should be laid to rest.

So too are the days of PIMCO as a purveyor of “safe and reliable investments.” The embrace of riskier, more-complex products can only mean higher costs and lower returns for PIMCO. Say it with me: 2 & 20 generates plenty!

The loser in this are the institutional investors who have come to rely on the “bond king” for safety and security.  The winner? The new bond king, Jeff Gundlach’s and his firm Doubleline. We swapped some holdings form PIMCO to Doubleline last year; I suspect that we will eventually move the rest in that direction.

Here’s a fun bet: Who wants to guess how much AUM Doubeline takes away from PIMCO over the next decade…?



Bond-King Pimco Plans to Push ‘Alternative Funds’
Kirsten Grind
WSJ,  August 28, 2013

Category: Fixed Income/Interest Rates, Hedge Funds, Investing

“I Am Looking to Outperform the Markets by 4-5% a Year”

Lately, the day job has been inspiring many of our Philosophy Phriday posts. (This coming Sunday’s WaPo column was also inspired by what we see int he office). Today’s post is another such example. Perhaps its because we run a somewhat different business model than is typical in the finance industry in the US. Our…Read More

Category: Apprenticed Investor, Hedge Funds, Investing, Philosophy, Psychology, Really, really bad calls

Vancouver: Romancing Alpha, Forsaking Beta

This is the presentation I gave in Vancouver — its an expanded version of the Institute for Responsible Investing presentation I gave at the Kennedy School./  

Category: Hedge Funds, Investing, Psychology

Interview with Jim Rogers

I am off to this conference this weekend — one of the other keynoter speakers will be Jim Rogers. Last month, Joe Dedona, head trader at our Institutional Desk, sat down with Jim for this interview: ~~~ Fusion MarketSite was fortunate to interview Jim Rogers, co-founder of the Quantum Fund with George Soros. Legendary investor, author and world traveler,…Read More

Category: Hedge Funds, Investing, Think Tank

Hedge Fund Dysfunction Syndrome

  Ron Burgundy says: Stay classy, Businessweek!       Source: Why Hedge Funds’ Glory Days May Be Gone for Good By Sheelah Kolhatkar BusinessWeek, July 11, 2013

Category: Financial Press, Hedge Funds

How Gold Lost Its Luster, How the All-Weather Fund Got Wet, and Other Just-So Stories John Mauldin July 3, 2013     We have not revisited the topic of gold in Outside the Box recently, mostly due to the fact that nearly everything I read on the subject is derivative of what I have been…Read More

Category: Gold & Precious Metals, Hedge Funds, Think Tank

The Other Zulauf . . .

In 2010, I did an extensive interview with Felix Zulauf. He and his son, Roman, are launching a new hedge fund. Joe Dedona, head trader at our Institutional Desk, sat down with Roman for this interview: ~~~ Roman Zulauf is Co-CIO of Vicenda Asset Management, an alternative asset management company based in Zug, Switzerland.  We…Read More

Category: Hedge Funds, Investing, Markets, Think Tank

Possible versus Probable

Its Friday, and has become my wont, this is the day of the week I like to kick back, wax philosophical about various thoughts kicking about me noggin. One of the things that I have been noticing of late is the way so many people seem to confuse facts with forecasts. Twitter is rife with…Read More

Category: Hedge Funds, Investing, Mathematics, Philosophy, Venture Capital

Bad Chart: Hedge Funds’ Long Term Gains

Click to enlarge Source: Moneybeat   I have been in the midst of a big research project that has led to me looking askance at the claims and long term returns of hedge funds. It began with the research I did for Romancing Alpha, Forsaking Beta, and has led to other interesting places. But as…Read More

Category: Data Analysis, Hedge Funds, Investing

Romancing Alpha, Forsaking Beta

Below is my presentation: The High Cost of Neuro-Financial Errors: How Cognitive Bias and Performance Chasing leads to Investing Failures at the Trustee Leadership Forum for Retirement Security conference at the Kennedy School, Harvard University June 10, 2013.     Cambridge is simply lovely . . .

Category: Hedge Funds, Investing, Psychology