Pacific Investment Management Co. may see asset withdrawals of as much as 30 percent after the surprise departure of Bill Gross, a legend in the bond world who became a familiar face to Main Street investors as they poured money into the firm’s funds through retirement plans.
(Reuters) - Bill Gross' abrupt departure from Pimco, the giant bond firm that he co-founded more than four decades ago, was preceded by months of clashes between the star investor and the firm's executive committee that got progressively worse, according to sources familiar with the situation.
Money managers said they are monitoring developments at Newport Beach, California-based Pimco, which manages $1.97 trillion in assets and has seen record redemptions as investors turned away from fixed-income in anticipation of rising interest rates. Sanford Bernstein said in a report today that Pimco could see withdrawals of 10 percent to 30 percent.
“Stunning,” Michael Rosen, chief investment officer at Santa Monica, California-based Angeles Investment Advisors, said of the departure.
http://www.bloomberg.com/news/2014-09-26/pimco-could-see-withdrawals-up-to-30-as-managers-stunned.html(Reuters) - Bill Gross' abrupt departure from Pimco, the giant bond firm that he co-founded more than four decades ago, was preceded by months of clashes between the star investor and the firm's executive committee that got progressively worse, according to sources familiar with the situation.
Tensions had been building within Pimco, the Newport Beach, California-based asset manager with about $2 trillion under management. Co-Chief Investment Officer Mohamed El-Erian, Gross's long-time heir-apparent, made an acrimonious exit in January. The flagship Total Return Fund, the world's largest bond fund, suffered 16 straight months of outflows. The wrangling and the underperformance grated on the executive committee, chaired by Chief Executive Douglas Hodge.
"While we are grateful for everything Bill contributed to building our firm and delivering value to Pimco's clients, over the course of this year it became increasingly clear that the firm's leadership and Bill have fundamental differences about how to take Pimco forward," Hodge said in a statement on Friday.
As Gross, known as the "Bond King" within the industry, butted heads with colleagues, the clashes got worse. In recent days, about five senior portfolio managers told the executive committee that they would quit if Gross stayed, the sources said.
Gross himself threatened repeatedly to quit, letting management know that he had been looking around for a role elsewhere. Jeffrey Gundlach of DoubleLine Capital, Gross' arch-rival and the closest contender for the Bond King crown, said in an interview on Friday that Gross approached him early last week about a possible role.
They met last week at Gundlach's house in Los Angeles. The two discussed the possibility of Gross joining DoubleLine, but Gundlach said he wasn't willing to share direction of the firm with Gross.
"He didn't seem that rattled. But he didn’t seem happy. He seemed a bit angry about what was going on," Gundlach said.
In recent days, when Gross again threatened to quit, the executive committee decided it was time he actually left the firm, one of the sources said.
The firm had already put a succession plan in place, choosing Deputy Chief Investment Officer Dan Ivascyn as the successor. Allianz SE (ALVG.DE), the firm's German parent, had given its blessing. An announcement of Gross' ouster had been prepared, and was set to be announced as soon as Saturday, the source said.
Then, Gross sprung a surprise.
On Friday morning, Gross quit Pimco to join asset manager Janus Capital Group (JNS.N), run by his former Pimco colleague Richard Weil. Gross will manage the Janus Global Unconstrained Bond Fund (JUCTX.O). The fund, started in May, has just $13 million in assets. Pimco Total Return Fund has about $222 billion.
"It is the right thing," Gundlach said of Gross's move to Janus. "Now he can perform better because he isn't managing a lot of money."
Gundlach said Gross left him a voice mail on Thursday evening, saying he was leaving Pimco to join another firm.
Gross didn't respond to requests for comment.
GROSS WALKS AWAY
Gross' abrupt departure climaxes a drama that has riveted industry executives, investors and rivals over the past year. It raises questions about the future performance of the firm, which counts tens of thousands of ordinary Americans and major institutions including the CalPERS pension fund as investors in its mutual funds, exchange-traded funds and other products.
U.S. Treasuries prices fell on Friday, Allianz slipped more than 6 percent in German trading and Janus soared 43 percent.
"I think people are concerned that Pimco is going to have to liquidate, so there is some pre-selling going on ahead of the fact that they may have to do some selling," said Tom di Galoma, head of rates and credit trading at ED&F Man Capital Markets.
Pimco has been stressing in meetings with its investors that the company had several people who could succeed Gross and that he would be playing a smaller role in the firm's investment and management decisions in the future, said Karissa McDonough, a fixed income strategist at People's United Wealth Management in Burlington, Vermont, who met with Pimco representatives in early September.
"They were trying to reassure us by driving home the point that they're not so dependent on Bill Gross anymore," she said.
Ref http://www.reuters.com/article/2014/09/26/us-janus-billgross-exit-insight-idUSKCN0HL2AW20140926
Bill Gross's decadeslong run as one of the world's top fund managers started by accident—and with one.
Bedridden at Duke University Hospital in 1966 after a car crash, Mr. Gross studied a book about counting cards. He healed and headed to Las Vegas, turning a $200 investment at the blackjack tables into $10,000.
"I wanted to prove you could beat the system," he later told The Wall Street Journal. "I thought about what I could do that takes the same skills. I realized it was investing."\Nearly half a century after founding Pacific Investment Management Co. and building it into the world's largest bond-fund manager, Mr. Gross is out to prove himself again.
Mr. Gross, 70 years old, stunned Wall Street on Friday by resigning from his Newport Beach, Calif., firm after months of tension with his colleagues and amid concerns among investors that led to massive outflows from his flagship Pimco Total Return Fund.
He will join the far-smaller rival Janus Capital Group Inc. on Monday. Mr. Gross, and Janus, are betting that his star power and his skills as an investor will help lure money to Janus from Pimco and others.
Mr. Gross earned a name as the "Bond King" with his knack for predicting well ahead of the pack where interest rates were headed.
And long before it was fashionable on Wall Street to eschew a button-down approach, Mr. Gross built a brand steeped in his loose, Californian style.
http://online.wsj.com/articles/bill-gross-built-pimco-empire-on-prescience-flair-1411773215
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