Nicholas Fitman
Bill Gross, a famous investor in
the bond world, made a surprise departure from Pacific Investment Management
Co. (Pimco). Pimco manages mutual funds
with 1.97 trillion assets. Gross helped
found the company and made it the star it is today. Over the years Gross has outperformed the
majority of his peers and made himself a celebrity with his dynamic
personality. Pimco has had internal controversy
throughout the year beginning with the departure of its chief executive
officer, Mohamed El-Erian. Pimco has
seen 16 straight months of withdrawals.
Allegedly within Pimco Gross was a lightning
rod for conflict, and when several deputies told management Gross had to go or
they would, Gross found out and resigned.
The parting of Gross could mean withdrawals of up to 30% from their
funds. Retirement funds seem divided on
what they will do with their assets.
Some are standing put, saying one man doesn’t manage a trillion dollars
himself, others saying they are following Gross. Gross is joining Janus Capital Group Inc
(JNS) to get back to investing and step out of a management role. Meanwhile Janus rose 34 percent to $14.93 while
Allianz SE, the German insurer that owns Pimco, declined 6.2 percent.
Most investors withdrawing assets
from Pimco stated the internal turmoil was the reason for their exit, Gross was
just the final straw. The seems to be
confusion over Pimco’s investment strategy.
Bloomberg advised against following celebrity investors saying some are
flukes and most have their best days behind them.
As for Pimco’s future, they named Daniel
Ivascyn as the new group chief investment officer. Ivascyn has beaten 99 percent of his peers
over the past three and five years, according to data compiled by Bloomberg. It’ll
be interesting to see how investors react in the long term to these changes in
Pimco and Janus.
http://www.bloomberg.com/news/2014-09-26/pimco-could-see-withdrawals-up-to-30-as-managers-stunned.html
1 comment:
I found Nick’s post to be quite interesting due to the fact that the departure of Mr. Gross from Pimco has not only effected the funds he managed, but rather the financial industry as a whole. With an unofficial nickname as prestigious as the “Bond King” it shouldn’t come as much of a surprise that when Gross left Pimco so did billions of dollars’ worth of assets. Between September, 26th (the day of Gross’ resignation) and October 1st over $20 billion dollars of assets flowed out of Pimco’s Total Return Fund alone.
What I found particularly interesting about this massive amount of outflowing assets was where they were going. Pimco’s Total Return Fund had been struggling for the past 16 consecutive months, as Nick mentioned, and Mr. Gross’ exit was the straw that broke the camel’s back. However Mr. Gross’ move to Janus Capital Group did bring some assets and loyal clients with him, the bulk of Pimco’s lost assets were being spread throughout the bond fund industry. Some of the most noted beneficiaries of Pimco’s internal problems have been DoubleLine Captial’s Total Return Bond Fund (34 billion AUM), Metropolitan West’s Total Return Bond Fund (32 billion AUM), as well as Legg Mason and BlackRock.
I have been holding a position in BlackRock in my MarketWatch portfolio which initially sparked my interest in Gross’ departure. I believe the news of his departure has played at least a partial role in BlackRock’s share price increase in the last month. The question now is, will Pimco continue to bleed assets or will investors regain faith in the company’s new leadership? As Nick stated, Daniel Ivascyn will take Mr. Gross’ spot as Pimco’s new Chief Investment Officer while Mark Kiesel, Scott Mather, and Mihir Worah will take over management of their Total Return fund. I believe it will be interesting to see how things will proceed with a new set of executives in place at Pimco throughout the remainder of 2014 and the 2015 fiscal year.
Post a Comment