The Pimco Challenge Facing Allianz's Jackie Hunt in Three Chartsby
Jackie Hunt, who was named head of asset management and U.S. life-insurance at Allianz SE on Thursday, is joining Europe’s biggest insurer as its Pacific Investment Management Co. fund management unit struggles with outflows.
Getting a grip on costs at Pimco will be among the key challenges for Hunt, 47, who previously headed Prudential Plc’s U.K. and European division. The asset manager’s cost-income ratio worsened to 61.3 percent last year from 54.5 percent in 2014, after Allianz had to introduce a bonus program to retain workers and Pimco spent more on marketing following the exit of star money manager Bill Gross in September 2014.
The impact of a bonus program introduced to retain talent after Gross’s departure will decline by about two thirds in 2016, Allianz said in a presentation last month, making Hunt’s job easier.
Some analysts say Hunt’s job is less important than the investment talent at Newport Beach, California-based Pimco. “When Gross left Pimco, Allianz shares tanked. When Jay Ralph left yesterday there was no such impact,” said Andreas Schaefer, an analyst at Bankhaus Lampe. “What matters is the investment performance and if that doesn’t bring Pimco back to inflows, then the only option that Allianz really has is changing the investment managers.’’
While outflows continue at Pimco, Allianz Chief Executive Officer Oliver Baete said last month that he expects them to stop by the end of the year. Net outflows at the asset manager almost halved to 125 billion euros last year compared with 2014. That compares with third-party net inflow of 17.5 billion euros last year at Allianz Global Investors, the insurer’s second asset manager.
Pimco has become an important driver for Allianz’s operating profit since it was acquired in 1999. Boosting revenues there would help Baete achieve his plan of raising Allianz’s earnings per share by 5 percent on average from 2016 to 2018.
“Pimco is in good shape with its current management team and it’s only a question of time before outflows stop,’’ said Daniel Bischof, an analyst at Baader Helvea. “As long as they keep their strong performance, they will succeed and Allianz is well-advised to stick to its principle of leaving investment decisions mostly to them.’’