Bond King came from the media
Wikipedia says Fortune magazine called him the Bond King in 2002, and the financial media kept using the nickname until he retired
Famous Traders · Bonds
Bill Gross
Bill Gross / The Bond King and Co-founder of PIMCO
A former blackjack card counter who built the world’s largest bond fund, rode a bond bull market for almost 40 years, then stumbled when interest rates began to turn. On this page you can try Kelly betting at a blackjack table and calculate a bond’s total return when rates move.
TOTAL RETURN · SERIES 1987Bond King
BG
PEAK ASSETS 2013$293BPIMCO Total Return Fund
- 1971Co-founded PIMCO
- 1987Launched the Total Return fund
- 2013Peak assets about $293B
- 2014Left for Janus
FIXED INCOMENEWPORT BEACH
Illustration: designed as a postage stamp, because Gross is a world-class stamp collector. No openly licensed photo was found
Born1944
Co-founded PIMCO1971
Total Return at its peak (2013)$293B
Blackjack stake, as he tells it$200
PIMCO Total Return · 2013$293BThe fund’s peak assets, the largest of any mutual fund in the world at the time
1987 → 2014≈7.8%/yrAverage annual return from the fund’s launch until he left, as reported by Fortune
Las Vegas · 1966$200 → $10,000His blackjack stake as he tells it, which he used to pay for his MBA
01
ProfileQuick facts
NameWilliam H. Gross (Bill Gross)
Born13 April 1944 in Middletown, Ohio, USA
EducationBachelor’s degree in psychology from Duke University (1966) and an MBA from UCLA (1971)
Before financePlayed blackjack in Las Vegas after graduating, then served in the US Navy from 1966 to 1969
FirmCo-founded PIMCO in 1971 as the money management unit of the life insurer Pacific Mutual
NicknameBond King
Famous fundThe PIMCO Total Return Fund launched in 1987, with peak assets of about $293 billion in 2013
AwardMorningstar named him Fixed-Income Manager of the Decade in 2010
Leaving PIMCOOn 26 September 2014 he moved to Janus Capital, then retired from managing funds in February 2019
HobbiesA world-class stamp collector who has given hundreds of millions of dollars to charity
02
Riding the bond bullFrom the blackjack table to a bond bull market lasting almost 40 years
Gross studied psychology at Duke. In his final year he was injured in a car accident and spent his recovery reading Edward Thorp’s book on card counting, Beat the Dealer. After graduating he went to Las Vegas and says he turned $200 into about $10,000 before joining the navy
After his MBA from UCLA in 1971 he joined Pacific Mutual and co-founded PIMCO. His career lined up perfectly with the interest rate cycle: rates peaked in 1981, then fell almost all the way to 2020. Anyone holding bonds in that period profited as prices rose with falling rates. Tap each year to see the story
US 10-YEAR TREASURY YIELD · ANNUAL AVERAGE · APPROX.The US 10-year Treasury yield and Gross’s journey
1971 · After his MBA, Gross joined Pacific Mutual and, with Jim Muzzy and Bill Podlich, set up the money management unit that became PIMCO. Wikipedia says it started with about $12 million, while Pacific Life’s history says it had about $8 million at the end of its first year
1 / 11
The line shows approximate annual averages of the US 10-year Treasury yield, to show the long-term direction, not official figures. Monthly or daily values could be higher or lower
The principle he says he learned at the blackjack tableNever bet more than about 2% of your capital, however much the odds favour you, because the unexpected can always happen
Paraphrased from an interview summarised by The Acquirer’s Multiple, not a direct quote
03
The Kelly tableLab: the blackjack table, how much can you bet and survive?
Having an edge is not enough; you also have to size your bets right. Simulate 300 card counters, each starting with $200 and the same edge, differing only in bet size per hand, then see where each one’s money goes after thousands of hands
Median player’s money at the end—
Finished with a profit—
Fell below $20 at some point—
Reached $10,000—
Kelly for this edge = 2%
A simple model: each hand wins or loses an amount equal to the bet, and the chance of winning is 50% plus half the edge. Splits, doubles and 3-to-2 blackjack payouts are excluded. Minimum bet is $1. A real card counter’s edge depends on table rules and betting method, usually around 0.5–2%. Every run is random
What this means for Forex
A trading system with an edge can still lose many times in a row. If you risk too much per order, 10 losses in a row can leave your account unable to recover. That’s why most traders limit risk per order to about 1–2% of capital, which matches the rule Gross used at the blackjack table
HOUSE EDGE · COST OF TRADING
Cut the house edge Spreads and commissions are the other side’s edge. Open an XM account through 1TRADER and get up to 90% of the IB commission on every lot
Open account ↗1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
04
Total returnLab: a bond’s total return when interest rates move
The heart of Gross’s style is total return: the interest received plus the gain or loss from bond prices, which move opposite to rates. Long-term bonds (high duration) move more. Pick a real year or set the values yourself, then see what holding a bond for one year would earn
Interest received (carry)—
Price gain or loss—
1-year total return—
Maximum rate rise (break-even)—
A simple model: total return ≈ yield at purchase − duration × rate change + approximate convexity, as if rates changed at the start of the year. The chosen years use approximate US 10-year Treasury yields at the start and end of the year. Not the actual performance of any fund
What this means for Forex and gold
When US bond yields rise sharply, as in 2022, the dollar tends to strengthen and gold tends to come under pressure, because cash and bonds pay more. When rates fall, as in 2008 or 2020, the picture often reverses. The bond market is a compass for currency and gold traders
CARRY · COSTCosts per lot eat into total return tooTrade with XM account through 1TRADER and get up to 90% of the IB commission on every lot
1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
05
Fact checkFact check: truth and stories passed along
Gross’s life includes legends he tells himself and news from his downturn that has been exaggerated. We sort each one by the weight of the evidence
Turned $200 into $10,000 at blackjack
This is a story Gross has told in many interviews: he read Edward Thorp’s Beat the Dealer and went to count cards in Las Vegas. No independent evidence confirming the figures has been found
Was once the world’s largest mutual fund
CNBC reported that Total Return had peak assets of about $293 billion in 2013, before losing the top spot to a Vanguard stock index fund in October of the same year
Gross founded PIMCO alone
PIMCO began as a unit of Pacific Mutual, with Jim Muzzy and Bill Podlich as co-founders alongside Gross. He led investments, but was not the sole founder
Sold all his Treasuries and got it wrong
Forbes reported that the fund cut US Treasuries to zero in February 2011, then rates fell instead. The fund lagged its benchmark and trailed most rival funds that year
Was fired from PIMCO
He resigned and moved to Janus himself on 26 September 2014, amid reports that the firm was preparing to oust him. The following year he sued PIMCO, claiming he was forced out. The case was settled, with no court ruling
He was just as good at Janus
Fortune reported that the fund he managed at Janus averaged less than 1% a year, lost almost 4% in 2018, and had peak assets of only about $2.24 billion
The lawsuit money went into his own pocket
CNN reported that the $81 million settlement went entirely to charity, and Gross added more, bringing his total donation to about $100 million
Every lot you trade with XM through 1TRADER earns cash back of up to 90% of the IB commission, lowering your costs over time
Open an account for cash back ↗1TRADER is a partner (IB) and earns a commission when you open an account through our link · % is the share of IB commission returned to you · How to get rebates
06
LessonsLessons for Forex and gold traders
Your checklist
0/4
Think in total return
A bond’s return comes from interest received plus price gains or losses. It’s the same in Forex: an order held overnight has both swap and price movement, and you must count both
Bet size matters more than confidence
Gross’s first lesson from the blackjack table was never to bet more than about 2% of capital, even with an edge, because losing streaks can always happen. Apply the same principle to risk per order
Separate the big picture from your entry timing
PIMCO held a forum every year to look at 3–5 year trends, then adjusted the portfolio to short-term news. Traders should know the big interest rate trend first, then look for timing from economic data
Your view can be right but your timing wrong, and still lose
In 2011 Gross thought rates had to rise, but they actually rose years later, and in the meantime the fund lagged its benchmark. Set the point where you admit you’re wrong in advance; don’t let a macro view turn into stubbornness
07
Quiz5-question quiz
Question 1 / 5
In which year was PIMCO founded?
In 1971, within Pacific Mutual. 1987 is the year the Total Return fund launched
According to Gross, how much money did he start playing blackjack with in Las Vegas?
He says he started with $200 and ended with about $10,000, which he used to pay for his MBA
If rates rise 1%, roughly what happens to the price of a bond with a duration of about 8?
Bond prices move opposite to interest rates, by roughly the duration multiplied by the rate change
Roughly what were the PIMCO Total Return fund’s peak assets in 2013?
About $293 billion, the largest of any mutual fund in the world at the time
In an even-money game where you have a 2% edge, what % of capital does the Kelly formula suggest betting?
For an even-money game, the Kelly fraction equals the edge, which is 2%. Betting much more than this grows money more slowly or causes damage, even with an edge
0/5
08
Follow the ratesFollow rates, control your bet size, then look for timing
What you can apply from Gross is treating interest rates as the big picture, thinking about returns in total, and never betting more than you can afford to lose.
REBATE · 1TRADER
Trade like a pro: control your costs
Open an account through 1TRADER and get cash back on every lot you trade, lowering your spread and commission costs over time.
How to get rebates, step by step →Leveraged trading carries high risk. Study the broker’s terms and the risk disclosure before opening an account.
09
Further readingFurther reading
- Bill Gross on InvestingWilliam H. Gross · 1998Gross’s own book, on total return thinking, looking at long-term trends, and his story from the blackjack table to PIMCO
- Beat the DealerEdward O. Thorp · 1962The book Gross says he read before going to Las Vegas, explaining card counting and the idea of bet sizing when you have an edge
Sources for this article
- Wikipedia: Bill H. Gross
- Wikipedia: PIMCO
- Pacific Life 150 Years: PIMCO, An Underdog Makes Good
- The Acquirer’s Multiple: Bill Gross, Blackjack Taught Me About Risk Management (2022)
- Forbes: Still The Bond King? PIMCO Total Return Having Worst Year Since ’95 (2011)
- InvestmentNews: Gross’ Total Return Fund not returning a big total (2011)
- InvestmentNews: Bad call by Gross on tapering hits Pimco Total Return (2013)
- CNBC: Pimco Total Return Fund posts record outflow (2014)
- CNN Money: Bill Gross reaches $81 million settlement with Pimco (2017)
- Fortune: Bill Gross Retires (2019)
- LGT: Bill Gross and the Bond King story
10
FAQFrequently asked questions
Who is Bill Gross?
The co-founder of PIMCO in 1971 and manager of the PIMCO Total Return fund, once the world’s largest mutual fund. The media called him the Bond King
Why was he called the Bond King?
Because he managed one of the largest pools of money in the bond market anywhere. His main fund had peak assets of about $293 billion, and his views on interest rates could move markets
Did Gross really play blackjack?
He says that after graduating from Duke in 1966 he went to count cards in Las Vegas, turned $200 into about $10,000, and learned a lesson about bet size that he used throughout his career. The figures come from his own account
Why did Gross leave PIMCO?
After weak performance in 2011 and 2013 and internal conflict at the firm, he left for Janus Capital on 26 September 2014. He later sued PIMCO and settled in 2017 for $81 million, which went to charity
How can his ideas be used with Forex and gold?
Follow the direction of interest rates, the main driver of currencies and gold, think in total return including both swap and price, and limit risk per order to about 1–2% of capital
Educational content, not investment advice. Return and asset figures are publicly reported figures. The labs use approximate data and simple models. · risk disclosure · Forex glossary