The Man Behind Pimco's Great Debt Bet Closes In on His Next Big Trade

Daniel Ivascyn rode one big trade all the way to the top of the bond-market universe: speculative mortgage debt that he scooped up on the cheap in the wake of the great financial crisis. It made a fortune and, in turn, made everyone forget about the messy departure of his predecessor atop Pacific Investment Management Co., Bill Gross.

Now, more than a decade later, Ivascyn, Pimco’s chief investment officer, finds himself at a critical juncture. His $117 billion Pimco Income Fund, the world’s largest actively managed bond fund, has started to trail its very top-performing peers, and investors, burned by a brutal wipeout across the bond market in 2022, are losing patience. They yanked $23 billion from the fund last year, the most since its launch in 2007.

Ivascyn, 53, gets the angst that’s brewing out there but exudes confidence in his strategy. He’s been waiting, he says, for a big-score kind of moment like the one he found back in the late aughts and says he’s finally on the cusp of delivering it to investors.

The market he’s eying this time is corporate debt. As the Federal Reserve approaches the end of its aggressive rate-hiking cycle, companies face a big reset higher in borrowing costs while the economy is cooling. It’s a backdrop that he expects will eventually roil credit markets, creating buying opportunities in a variety of distressed securities.

“Our mindset is be willing to be average - for a time - and protect capital and then look to be a top cohort performer,” Ivascyn said in an interview. “You need significant dislocations in the market to go on offense to generate strikingly high differentiated returns.”

Ivascyn’s ascent to the pinnacle of the bond market has, in many ways, been a quiet one. He doesn’t crave the spotlight — on TV, at conferences and on social media — the way Gross and his partner Mohamed El-Erian did. Ask a casual observer of financial markets who the most important name in bonds is, and they’d probably offer up Jeffrey Gundlach or, until recently, the late Scott Minerd.

But not only does Ivascyn manage more money, he also has a track record with little parallel. The Income Fund, which he co-manages with Joshua Anderson and Alfred Murata, returned 4.2% annually over the decade through Feb. 2, more than all 218 peers with assets of at least $1 billion during that period, data compiled by Bloomberg show. Over the past five years, it beat 92% of competitors. On a three-year basis, its 1.2% return was better than 88%.