Investing

Bond fund managed by Bill Gross has its worst day ever

Key Points
  • Janus Henderson Investors Global Unconstrained Bond Fund plunged by nearly 3 percent on Tuesday as bond market volatility surged on Italian geopolitical concerns.
  • The fund is now down 5.9 percent for the year to date through Tuesday.
Bill Gross' Janus fund down
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Bill Gross' Janus fund down

Bill Gross had a bad day Tuesday.

The portfolio manager's Janus Henderson Global Unconstrained Bond Fund declined by nearly 3 percent, its worst day since inception, as bond market volatility surged on Italian geopolitical concerns. The fund is now down 5.9 percent for the year to date through Tuesday, according to Morningstar.

As of the end of March, the fund had minimal, if any, exposure to Italy. The European country, in the headlines this week because of political turmoil, is not listed among the fund's 10 largest country exposures.

Instead, the drop in performance may have been driven by a negative bet against Treasury bonds, looking for their price to fall.

In a letter to investors about the first quarter, Gross wrote, "Volatility sales on U.S. interest rates contributed to performance, namely positions structured to benefit from a moderate rise in rates."

Assuming he didn't change that position in the second quarter, that bet would have blown up. On Tuesday, bond prices rallied as yields tumbled when investors grasped for a safe haven from the prospect of another euro zone crisis.

The yield on the benchmark 10-year Treasury note broke below 2.8 percent on Tuesday, declining more than 15 basis points from the previous session and off its highs above 3.13 percent earlier this month. Bond yields move inversely to prices.

Gross is the portfolio manager of the firm's $2.1 billion Global Unconstrained Bond Fund. Previously, he co-founded and was chief investment officer of Pimco.

Janus Henderson did not immediately respond to a request for comment.