Wed, Mar 29, 2017 - Page 10 News List

PIMCO settles feud with cofounder

CABAL:Bill Gross, who now runs a fund for Janus, said in a lawsuit that he was forced out by executives who wanted to sell high-fee products instead of bond funds

Bloomberg

For Bill Gross, the long goodbye is finally over. More than two years after the legendary bond manager was ousted from Pacific Investment Management Co LLC (PIMCO) — the firm he cofounded and built into a US$2 trillion asset manager — he settled a bitter legal dispute with a public rapprochement.

PIMCO, where Gross shot to fame as the king of the bond market, agreed to pay US$81 million — a modest sum given the fortune he amassed during his 43 years there.

It also agreed to dedicate a new “Founders Room” at its headquarters in honor of Gross and others who launched the firm in 1971, a nod to his role as its most famous market prognosticator and manager of the PIMCO Total Return Fund, once the world’s largest mutual fund.

PIMCO also named him as a director emeritus of the firm’s charitable foundation.

For Gross, 72, the development brings an end to a long struggle in the twilight of his career to overcome his split with the firm and turn the page at Janus Capital Group.

PIMCO faced a torrent of redemptions after Gross’s exit in 2014, but that money did not follow him en masse to his new home.

For PIMCO, the resolution offers the firm, which managed US$1.5 trillion as of Dec. 31 last year, a chance to move on from Gross’ legacy, said William Thompson, PIMCO CEO from 1993 to 2008.

“It’s a new day,” Thompson, who remains friendly with Gross and associates at PICMO, said in a telephone interview. “You’ve got to look forward. If you don’t spend most of your time time focused on today and tomorrow, then you’re probably not doing the right thing for your investors.”

Gross sued Newport Beach, California-based PIMCO, contending he was ousted by a “cabal” of executives who wanted a larger share of his bonus, which was US$290 million in 2013.

He also asserted in the suit that the executives wanted to offer more high-fee products to investors rather than PIMCO’s traditional bond funds.

Gross, who did not reply to a request for comment, now runs the US$1.9 billion Janus Global Unconstrained Bond Fund.

“Bill Gross has always been larger-than-life,” PIMCO group chief investment officer Dan Ivascyn said in a statement announcing the agreement. “Bill has had an enormous influence on PIMCO and the careers of many who have passed through its halls. He built this business from the ground up and we have great respect and admiration for his talents.”

After his departure, Gross set up a Janus office at a tower with a view of PIMCO’s headquarters from his window.

His unconstrained fund has had a total return of 5.1 percent since he took over management in October 2014, data compiled by Bloomberg showed.

That compared with a 6 percent return during the period for the US$3.5 billion PIMCO Unconstrained Bond Fund, which uses a similar go-anywhere strategy.

Gross’ reputation and PIMCO’s growth soared after the 2008 financial crisis, when his Total Return Fund posted gains as markets crashed.

Assets at the fund soared to almost US$300 billion by the first quarter of 2013, before investors spooked by the prospect of rising interest rates began pulling money.

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