Bill Gross says he made the best investment of his career only a few years ago, while his worst investing error dates back nearly six decades.
The billionaire cofounder of bond giant Pimco told Business Insider by email this week that his shrewdest wager to date was the purchase of a portfolio of master limited partnership (MLP) pipeline stocks around three years ago.
Pointing to Western Midstream Partners as an example, he trumpeted the “enormous” tax benefits of these types of stocks.
Specifically, Gross said their distributions are largely treated as return of capital instead of dividends, so they’re only taxed upon sale, and those deferred tax liabilities can be erased if the returns are passed down at death on a stepped-up basis.
“Yields are twice similar corporate pipelines,” Gross said. Western pays a dividend yield of over 8%, whereas Kinder Morgan pays around 4%.
“Higher oil prices have been an extra boost,” Gross added. The US-Iran conflict has fueled a roughly 60% rise in crude prices since the start of this year, generating higher storage and distribution fees for energy infrastructure companies.
Biggest misfire
As for his gravest investing mistake, Gross told Business Insider it was buying 30-year Treasurys after opening his personal account in 1969. “Lost 50% in 1 month,” he wrote.
Gross — whose nickname is the “Bond King” because he grew Pimco’s flagship Total Return Fund from scratch to $270 billion over nearly 30 years — previously described the episode to Financial Advisor as an “expensive lesson about the dangers of leverage.”
He told the magazine that he bought Treasury bonds with 10-to-1 leverage just months before starting at Pimco, using $10,000 he’d made playing blackjack.
Treasurys promptly tanked and “wiped out half of my savings,” Gross said. He added that it was the biggest mistake in percentage terms of his career, and it taught him that “gambling belongs at the casino.”
A pipeline of returns
Gross has been touting MLP pipeline stocks for several years. In October 2024, he underscored on his blog that deferred taxes on their dividends allow investors to fully reinvest them and juice their compounding, potentially boosting an 8% return to 9% or 10% over a five-to-10 year period.
He’s also highlighted that mutual funds are limited in how much they can invest in LP stocks, which helps to shore up their distribution yields and constrain their valuation multiples relative to peers.
Western’s total return, with dividends reinvested, has exceeded 200% over the past five years. Energy Transfer LP, Plains All American Pipeline LP, and MPLX, an offshoot of Marathon Petroleum, have posted similar gains. Other peers, such as Hess Midstream LP and Enterprise Products Partners LP, have performed more modestly.
