Bill Gross’s Canadian connections
Getting access to the prowess of legendary fixed income manager Bill Gross has been a constant pursuit of Canadian investors. It hasn’t mattered whether the 72-year-old Gross was with PIMCO or with his latest employer Janus Capital: Canadian firms wanted him to manage investments for their clients.
That pursuit continued this week when National Bank hired Gross to manage its newly formed NBI Unconstrained Fixed Income Fund. That fund’s objective “is to maximize total return, consistent with preservation of capital” and it will seek opportunities through investing in fixed income securities of “issuers located throughout the world with various maturities and credit ratings.” National Bank has rated the volatility of the fund as “low to medium.”
It’s just the latest in a long line of attempts by Canadian managers to channel Gross’s investment acumen. For instance, in mid-2002, PIMCO was one of the three fixedincome managers on the Sovereign Investment Program — a so-called wrap program started at Richardson Greenshields in 1993. At that time Richardson had an exclusive distribution arrangement with Russell Investments Canada, the manager that owned the Sovereign program. That arrangement moved to RBC Dominion Securities in 1996 when that firm bought Richardson. In later years other brokerage firms including Scotia Capital and TD Securities signed on to use the program.
At that time, PIMCO was also one of the fixed income managers on Russell’s Life-- Points Portfolios Program. In mid-2002, PIMCO managed about $500 million of client assets in the two programs.
In the spring of 2002, PIMCO entered the public markets. The firm was retained by Skylon Capital to be the sub-adviser of the Skylon Global High Yield Trust, a structured product offering unit holders an annual 7.25 per cent tax efficient distribution and the return of the original $ 25 per unit at the end of 10 years. The issuer — whose prospectus was cleared by the regulatory authorities — raised about $45 million in the IPO. The units traded on the TSX.
In the early years the fund’s net asset value rose to above $30 but the combination of the global financial crisis and unit holder redemptions affected net asset value. In 2012 the fund was wound up.
In the fall of 2002, Skylon and Bill Gross teamed up again on Skylon Global Capital Yield Trust, a deal that was similar to the earlier deal. In all, $140 million was raised from that offering with the distributions being set at 7.25 per cent and the return of capital at maturity. A decade later the fund was wound up and all the outstanding units were redeemed.
In mid-2003, Skylon and PIMCO got together their t hird product: t he Skylon International Advantage Yield Trust. That issuer sold two types of securities and raised about $ 137 million — predicated on paying out 5 per cent a year. A decade later the fund was wound up — though the redemption price was a tad less than the original investment.
In an interview Friday, Gordon McMillan the former chief executive at Skylon said that “Gross’s long track record in the industry speaks for itself. He did a great job in managing funds for Skylon’s clients for a number of years and I am sure he will continue to do a similar job with National Bank.”