After reaching peak AUM and personal net worth, the table stakes just aren’t worth playing any more. This is what retirement looks like now.
For years we’ve pondered whether the great investors of our age would surrender the keys to the market before or after they give up their grip on life.
After all, Buffett and Munger may have great genes and Boy Scout lifestyles, but they push the statistical limits every year. Carl Icahn in the land of the activists isn’t much younger.
And Bill Gross, who created a legend for himself in the ‘90s as the Bond King, is practically a baby at 74, a decade beyond the conventional retirement age.
The difference is that Gross has actually quit. After nearly a half century in the bond market — sometimes as an upstart or exile, other times as the $300 billion tail that wagged the Fed — he’s gone.
It’s worth digging a little deeper into what made him change his mind.
He could be a client, working a high-pressure job for decades and then finally deciding to step aside. He could be your boss or your partner.
One day, you could be him.
A sudden spurt of philanthropy
It’s noteworthy that Gross left Janus with little formal warning beyond a ceremonial two weeks notice.
His fund will be renamed by the end of this week. New managers have already stepped up.
By March 1, he’ll be gone, ostensibly to pay more attention to his $300 million family foundation.
While he has a long track record of giving his wealth back to the world, the timing is interesting. This particular entity was apparently active last year but we only heard about it a few weeks ago.
It’s not in any of the nonprofit databases I’ve seen. And although its scale makes it likely to be the successor of the charity Gross set up with his now former wife, there’s no public record of that transition happening in the wake of their divorce.
If anything, it looks like the marital foundation went dormant after the 2015 tax filing. Maybe it just took a few years to straighten out the entities — ex-wife Sue just started her own solo charity as well.
Either way, Gross has been content to juggle fixed income with philanthropy for decades now. And if he’s been itching to spend his life doing good, he’s not the kind of guy who’ll sit around for years before the paperwork finalizes.
He would’ve simply gone out and handed out the wealth while going into the office every day. The fact that he didn’t points to either a sudden revelation or a deeper motive.
And guys like Gross just don’t act on sudden revelations. He’d put a long plan in motion, pushing the button only when all the details were set.
Whether he would tell the people at Janus in advance is an open question.
Already a personal retirement fund
What I think is in the background is boredom and a lack of fresh worlds to conquer.
The industry just doesn’t scale to his expectations any more. He racked up more than $2.5 billion in personal wealth by attracting massive client assets and then demanding his share of the fee income.
Back at PIMCO he was a partner and shared in the success. Under Allianz he was just an employee, but you’re doing well when you earn the equivalent of 0.06% on $300 billion, not counting the funds you weigh in on.
Fee structures were different a few decades ago. That kind of cash was available for the managers to share.
Now, however, the fund Gross is leaving still charges 0.78% a year, but that’s still ten times what’s rapidly becoming the industry standard over on the no-load index side.
As fees plunge, you find yourself doing the same work that once earned $200 million paychecks for relative peanuts.
Even if Gross was taking the same 0.06% split of his Janus fund, his footprint has fallen to the point where he isn’t even running $1 billion any more. Those basis points that once felt like “king of the world” territory don’t even translate into $1 million a year.
This is a man who gave half his wealth up in a divorce, donated another $800 million in his lifetime and still has enough that the vanilla bond coupons pay 25 times what he must be making working for Janus.
Which raises another key point. He’s also his own best client right now with $700 million of what’s left in the $900 million fund coming from his own accounts.
He’s running his own money with a gracious facade of still being a player in the industry. Janus gave him office space and continued relevance.
But the returns just weren’t there. Gross is no fool. He recognizes that vanilla bonds were eating his lunch, despite all the hard work.
So if the salary no longer moves your career needle and there’s no pride in it any more because all that work isn’t adding value, why keep doing it?
He did it for a few years. His marriage broke down. His last Investment Outlook was nearly a year ago.
Those things used to be celebrated. Now we’re unlikely to see another one.
Of course he could surprise us, but this might be what life after the market looks like. If so, we hope he has fun.