September was one of the more dramatic months in the bond market that I can remember. The legendary “Bond King” Bill Gross unexpectedly departed Pimco, which he co-founded 43 years ago and grew into the world’s largest mutual fund company. I have fond memories of Bill Gross from my nearly five-year stint on the Pimco trading floor in the early 2000s. But I was several levels beneath Bill Gross and therefore worked more closely with some of the other leaders of the firm. One of those individuals was Dan Ivascyn, who to my delight is now Pimco’s new Chief Investment Officer. Ivascyn is also the portfolio manager of the Pimco Income Fund, which is the Pimco fund that we use in our Rainbow portfolios. As such, he is the manager we’d most like to see rise in the Pimco ranks. In my opinion, the recent transitions at Pimco have ended with a positive outcome for Abacus clients.
You may have noticed that your portfolio value dropped in the third quarter (the three-month period ending 9/30/14). Global equities (roughly 10,000 publically traded companies around the world) dropped about 3.4% for the quarter. Ironically, it almost comes as a relief to me when the occasional temporary decline in stock market value occurs. Without the occasional dip, there would be no rational basis to expect higher returns from stocks than the returns offered by bonds. And I like the idea of euphoric performance chasers getting scared back to cash, creating cheaper buying opportunities for Abacus clients (given our systematic rebalancing program). This principle—that the market is permanently creating value with occasional temporary declines—has been our mantra at Abacus, and it has served as a great source of clarity and equanimity for us in a world full of uncertainties. We hope you find comfort in it, too, as we are confident that your financial future will benefit from it.
