Investor Bill Gross: Bet against Bunds 'well timed, not well executed'

Wed May 27, 2015 8:01am EDT
 
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By Jennifer Ablan

(Reuters) - Bill Gross, the widely followed investor, admitted in his June Investment Outlook on Wednesday that his bet against the German Bund market was well timed but not profitable.

"My famous (infamous?) ‘Short of a lifetime’ trade on the German Bund market was well timed but not necessarily well executed," Gross, who runs the Janus Global Unconstrained Fund JUCAX.O, wrote in his latest report to clients titled "Mr. Bleu."

Gross's Janus Global Unconstrained portfolio is down 0.40 percent so far this year, underperforming its peers by 1.88 percentage points and lagging 93 percent of its non-traditional bond category, according to Morningstar data on Tuesday.

Last month, Gross said he placed a wager against German bonds, tweeting on April 21 that German 10-year Bunds were "the short of a lifetime" and that the bet was better than the pound in 1993.

Gross was referring to investors George Soros and Stanley Druckenmiller, who made their names betting against the pound in 1992.

German 10-year Bund yields set record lows following the European Central Bank's purchases of public-sector bonds on March 9 as part of its trillion-euro stimulus program, with the latest low of 0.049 percent touched on April 17.

Gross's investment appeared prescient, with prices on German bonds falling and their yields rising. The yield on the 10-year Bund has risen to 0.54 percent on Wednesday.

All told, Gross said the bet against Bunds "was a prime example of opportunities hatched by the excess of global monetary policy – zero based policy rates and tag team match quantitative easing programs which continue to encourage malinvestment in financial assets as opposed to the real economy."   Continued...

 
Bill Gross speaks at the Morningstar Investment Conference in Chicago, Illinois, June 19, 2014.   REUTERS/Jim Young