Bill Gross, co-founder and chief investment officer of Pacific Investment Management Co., said the firm plans to appoint more investment deputies in the coming weeks after the departure of Mohamed El-Erian.
“I intend there to be a number of heirs apparent and for each of them to have assigned asset roles on a global basis with a global menu,” Gross said today in a telephone interview from his office in Newport Beach, California. “We’re not just bond people anymore.”
Gross brought El-Erian back to Pimco in 2007 following a stint running Harvard University’s endowment because he knew “Mohamed could fill an important part of the puzzle” in planning for succession, he said in a 2010 Bloomberg interview. El-Erian, 55, was responsible for transforming Pimco from a bond shop to a diversified fund manager, in his dual roles of chief executive officer and co-chief investment officer.
He’ll leave in mid-March, according to a statement yesterday from Allianz SE, the Munich-based parent of Pimco. Douglas Hodge, the firm’s operating chief, will become CEO, and money managers Andrew Balls and Daniel Ivascyn will become deputy investment chiefs, helping Gross oversee the firm’s $1.97 trillion.
Gross said that as Pimco continues to evolve from a bond-centric firm to a diversified money manager, he intends to appoint investment professionals specializing in equities, global bonds and other asset classes to leadership roles. Gross, 69, said he has no intention of scaling back his role even as he elevates other executives.
“Think of me sort of as a permanent fixture,” he said. “I’d like to be here for a long time.”
Gross said growth in Pimco’s equity unit has been “disappointing” since a renewed push in 2009 as the funds have been slow to gather assets and performance has been lackluster.
A separate family of funds, the StocksPlus lineup, attempts to beat the stock market by using a combination of bonds and derivatives. Pimco intends to emphasize the performance of its StocksPlus family, led by Gross since he started them in the 1980s, he said. The $840 million Pimco StocksPlus Fund has averaged annual returns of 24 percent in the past five years, beating 91 percent of peers, according to data compiled by Bloomberg.
Gross said he was shocked and discouraged when El-Erian told him several weeks ago that he wanted to leave to “recharge the batteries,” write a second book and spend more time with his family. He, along with the firm’s executive committee, tried to persuade El-Erian to change his mind, Gross said. El-Erian’s “When Markets Collide: Investment Strategies for the Age of the Global Economy” came out in 2008.
“From our standpoint he was doing a great job,” Gross said in the phone interview. “The answer we gave him was basically, ‘Hell no, you can’t go.’”
The turbulence in the bond market over the past year isn’t the cause for El-Erian’s resignation, according to Gross. He cited other difficult times that El-Erian has weathered, such as turmoil in Brazil and Argentina when he invested in emerging-market debt.
“Total Return is more on my shoulders than his,” Gross said, referring to his $237 billion Pimco Total Return Fund. “I didn’t notice any additional stress whatsoever. He’s a man that deals with stress and that’s part of his makeup.”
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