Published On: Mon, Jan 5th, 2015

Pimco Concerns Dissipate as Stocks Climb, but Shadow of Bill Gross Lingers

Bill Gross

Fears over a possible tumble by the stock of Pacific Investment Management Corp. (Pimco) have abated recently.

On September 26, Bill Gross, the man who co-founded Pimco, announced his resignation from the company. The news baffled the financial world and fears ran high that Pimco’s stocks would plummet, Money-marketuk.com said.

The announcement in September triggered accelerated redemptions from the firm’s largest fund, Pimco Total Return Fund, amounting to US$60 billion in September, October and November 2014, collectively, the website said.

At the time there were rumours that the departure of Gross would result in a confined mini-crash of sorts within the walls of Pimco, with investors lining up around the block to cash in their shares, according to the website.

However, stocks rose steadily from November, and on December 18 Pimco made a statement, which said it expects global growth to accelerate in 2015 to around 2.75 per cent, up from 2.5 per cent during the previous year, the website said.

However, the shadow of Gross continues to hang over Pimco, The Australian said.

The giant bond manager on Friday disclosed a sharp rise in outflows from the flagship fund formerly run by Gross. Last month clients pulled $19.4 billion from Pimco’s Total Return fund, more than double the $9.5 billion that was yanked in November, the report said.

But the new outflows were lower than the $23.5 billion and $27.5 billion lost in September and October, respectively, as investors reacted to Gross’s acrimonious departure to Janus Capital, a rival investment firm. Total assets in the Total Return fund, which Gross managed for 27 years, dropped to $143.4 billion, from $162.8 billion in November, according to The Australian.

The December pullback suggests the Californian firm isn’t yet clear of the investor flight triggered by months of internal strife and the departure of its co-founder. Pimco, a unit of German insurer Allianz, also lost its chief executive Mohamed El-Erian last year after clashes with Gross, the report said.

Traders and portfolio managers say Pimco is a calmer place to work now that Gross is gone. Pimco also has made a series of aggressive moves internally to handle the outflows, including taking positions against rival managers to boost returns, The Wall Street Journal has reported.

But rivals still are trying to position themselves to attract some of the Pimco pullback, and many pension funds and large 401(k) plans haven’t yet made decisions about whether to move their money, the Australian said.

Pimco had $1.87 trillion under management as of September 30 and can absorb big, billion-dollar losses. Pimco’s mutual funds saw outflows of $86 billion from September through to November, according to data from Morningstar, the bulk of that coming after Gross’s exit. Morningstar has concluded outflows would have to reach $350 billion in the next two years before Pimco’s “ability to function at a high level would be impeded”, according to a recent report.

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