PIMCO is moving away from a founder-led model and the US$2 trillion asset manager’s flagship fund, formerly run by cofounder Bill Gross, which “does not define PIMCO,” chief executive Doug Hodge said on Sunday.
“Over the last five years, we have expanded into far more parts of the fixed-income market and into other asset classes and other geographies, so the PIMCO Total Return Fund does not define Pimco,” Hodge said. “It’s an important flagship product of this firm, but it is not our only strategy.”
Hodge and Dan Ivascyn, who takes over for Gross at the Newport Beach, California-based firm as group chief investment officer (CIO), said in an interview that they had been speaking to clients all weekend about the new leadership. PIMCO is a unit of Munich-based Allianz SE.
“With regard to our clients and the potential for outflows, again, when there is any significant change, we are out communicating with our clients,” Hodge said.
“The outflows that have happened — and that may happen — we stand by our clients. We are managing assets and are confident that the vast majority of clients will stand with us,” he said.
On Friday last week, Gross shocked the investment world by leaving his post as chief investment officer to join mutual fund management firm Janus Capital. The move followed record outflows from PIMCO’s flagship portfolio and clashes with other top executives.
Gross’ exit, eight months after his top deputy, Mohamed El-Erian, quit amid acrimony, may quicken speculation in the bond market about leadership uncertainties and accelerating outflow at the world’s largest bond firm.
Since the start of the year, investors have pulled US$25 billion from the PIMCO Total Return Fund, the world’s largest bond fund, and US$6 billion from the PIMCO Unconstrained Bond Fund, according to Morningstar data as of the end of last month.
Both were personally supervised by Gross, 70, who also oversaw the PIMCO Total Return ETF, the object of a US Securities and Exchange Commission probe.
El-Erian will be at Allianz headquarters in the next week or so, according to two people familiar with the situation, adding that the meeting had been planned several months ago and was unrelated to Gross’ departure. El-Erian declined to comment.
When asked if El-Erian could play a role at the firm in the future, Hodge said on Sunday: “We made some very clear decisions about the leadership of this firm with regard to Dan [Ivascyn] as our group CIO and the team of investors and leaders we have in place.”
Ivascyn, whose US$50 billion PIMCO Income fund is posting returns of 7.81 percent year-to-date as of Aug. 31, easily surpassing the 4.81 percent on the benchmark Barclays Aggregate for the same time period, will not be overseeing the Total Return Fund.
Mark Kiesel, Scott Mather and Mihir Worah will be portfolio managers for the US$222 billion Total Return fund, where Gross built his reputation as the “Bond King.”
“You will see a lot less self promotion,” Mather said about the post-Gross environment. “And you’re going to see a lot more emphasis on performance. It will be a lot more ‘We’ and a lot less ‘I.’”
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