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Billionaire former hedge fund manager George Soros. Image source: Insider Monkey. Republished under CC BY-ND 2.0.

Nearly a year ago, legendary bond fund manager Bill Gross, formerly of PIMCO, announced that he had landed a whale on behalf of his new employer, Janus Capital Group Inc, with two tweets:

Gross: (1/2) We are honored to be managing a new unconstrained strategic account for Soros Fund Management LLC. http://t.co/roWs8EBnYf

— Janus Capital (@JanusCapital) November 20, 2014

Gross: (2/2) I & my team will manage your new unconstrained strategic acct. 24h/day. An honor to be chosen & an honor to be earned as well.

— Janus Capital (@JanusCapital) November 20, 2014

On top of the size of the account and the fees it would generate, the investment had tremendous marketing value: One legendary investor, former hedge fund manager George Soros, giving another a half-billion dollar seal of approval, as it were.

Less than 12 months on, it appears Gross's round-the-clock effort wasn't enough for Soros (or, more accurately, for the investment team at his family office, Soros Fund Management).

How has Gross performed?

Over the 12-month period ending Sept. 30, 2015, the Janus Global Unconstrained Bond Fund, which Gross manages, returned (2.41%) (total return) against +0.25% for the 3-month U.S. dollar LIBOR (a benchmark interest rate).

(Sept. 30, 2014 is a good approximation for the start of Bill Gross's tenure as the fund's manager. Gross joined Janus effective Sept. 29, 2014, and he began managing the Janus Global Unconstrained Bond Fund and related strategies effective Oct. 6).

According to Morningstar, that ranked the fund at 243 out of 449 funds in the Nontraditional Bond category, or the 54th percentile (i.e., it beat 54% of the funds in its category). In other words, at the end of the third quarter, the fund was middle-of-the-pack.

Year-to-date through yesterday, the fund's return was negative 1.50% against +0.23% for 3-month LIBOR.

Soros Fund Management's assets were managed as a separate account from the fund but following the same strategy.

There is no mystery as to why Soros pulled its funds. It's obvious: Gross's performance has been disappointing.

But is it really that obvious? Actually, assuming the decision was based purely on performance (rather than an extraneous reason unrelated to Janus, which is entirely possible), this columnist thinks it is anything but. In fact, it looks downright bizarre.

Consider the length of the investment. The announcement of Soros Fund Management's investment was made on Nov. 24, 2014, and the account was closed at some point during the third quarter of this year. In other words, that money could not have been under Gross's care for more than 10 months.

That is a completely insufficient period of time in which to assess a fund manager's performance -- the numbers cited above say essentially nothing about Gross's skill or his prospective long-term returns. In fact, investors who select Bill Gross as a fund manager should want to see periods of underperformance, and expect some of them to be substantial (in terms duration and/or underperformance).

Why? Because those periods are evidence that the manager is willing to make high-conviction bets that deviate significantly from the benchmark and peers -- which is the very reason people invest with a fund manager like Gross, who is known for having an idiosyncratic approach.

This leaves us with three possibilities:

  1. The team at Soros doesn't understand how to evaluate fund managers.
  2. Soros Fund Management wanted/needed to free up some liquidity.
  3. Soros Fund Management lost confidence in Gross for reasons unrelated to his performance at Janus.

I think we can safely rule out the first of those explanations.

Alex Dumortier, CFA, has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.