Gross has left the company he co-founded and is joining Janus Capital Group.
Amid controversy, influential fixed income investor William H. Gross is gone from bond investment giant PIMCO to work for mutual fund giant Janus Capital Group, according to Janus and PIMCO officials.
Gross, the now former chief investment officer for PIMCO, will be leaving a company that is reportedly facing $65 million in redemptions from its flagship fund, and an investigation by the SEC of the $3.6 billion Pimco Total Return ETF, according to The Wall Street Journal.
The SEC investigation is a sign that the regulator is attempting to get a better view into the asset management industry, says Denise Valentine, asset management senior analyst in the Institutional Securities and Investments group at market research firm Aite Group.
“The SEC is focusing on asset managers, particularly large asset managers like Bill Gross, as it tries to get its arms around wider concerns on monitoring the industry,” Valentine says. “This is a learning process for all involved and may or may not reflect any errors on the part of PIMCO. The news certainly rattles everyone’s cage. And in the end, perhaps makes for better diligence in the detail.”
Before the SEC investigation, PIMCO also saw the exit in January of its CEO and co-chief investment officer Mohamed El-Erian, who is still with Allianz SE, the parent company of PIMCO. El-Erian holds the title of chief economic adviser and says that he left PIMCO to spend more time with his family.
As of June 30, 2014, PIMCO had $1.97 trillion in assets under management, $1.55 trillion in third-party client assets, 2,433 total employees and 731 investment professionals, officials say. The firm was founded in 1971.
In a prepared statement, PIMCO officials say that Gross will leave the firm, “effective immediately,” and that a succession plan is in place. In addition, the firm’s management board, which consists of managing directors, “will confirm shortly the election of a new chief investment officer,” according to the statement. “Relevant portfolio management assignments will also be announced at that time.”
With Gross’ exit, the top leadership at PIMCO consists of Douglas M. Hodge, CEO and Jay Jacobs, president.
After El-Erian’s departure, Gross established six deputy chief investment officer posts filled by: Andrew Balls, Dan Ivascyn, Mark Kiesel, Virginie Maisonneuve, Scott Mather and Mihir Worah. Other key executives are: David C. Flattum, general counsel; David Lown, chief administrative officer; and Drew Vaden, chief technology officer.
Hodge says in a statement that while the firm is “grateful” for Gross’ contributions to the firm’s growth. However, “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,” according to the statement.
The firm has been developing a succession plan “for some time to ensure that the firm is well prepared to manage a seamless leadership transition in its portfolio management team,” Hodge adds.
“Earlier this year, the firm established a new portfolio management leadership structure that reflects our long-held belief that the best approach for PIMCO’s clients and our firm is to evolve our investment leadership structure to a team of seasoned, highly skilled investors overseeing all areas of PIMCO’s investment activities,” Hodge says.
The firm has “built a deep bench of talent with extensive investment and leadership experience, including more than 240 portfolio managers globally,” Hodge says. “We will continue to add and promote talent at all levels to help us drive our firm forward. We are energized and fully focused on serving our clients today and into the future.”
Officials at Janus say that Gross will manage the Janus Global Unconstrained Bond Fund and related strategies, starting Oct. 6. He will join Myron Scholes, Ph.D., and other members of the Janus team focused on global asset allocation, officials say. An economist, Scholes won the 1997 Nobel Prize in Economics, sharing it with Robert Merton developing the Black-Scholes model to assess the value of stock options. Scholes is an emeritus professor at the Stanford Graduate School of Business.
At Janus, Gross will oversee “building-out the firm’s efforts in global macro fixed income strategies,” say Janus officials. “His concentration on such strategies will be separate and complementary to Janus’ existing and highly successful credit-based fixed income platform, built under the leadership of Janus’ Fixed Income Chief Investment Officer, Gibson Smith,” officials add.
“I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization,” Gross says in a prepared statement.
“I chose Janus as my next home because of my long-standing relationship with and respect for CEO Dick Weil and my desire to get back to spending the bulk of my day managing client assets,” Gross says. “I look forward to a mutually supportive partnership with Fixed Income CIO Gibson Smith and his team; they have delivered excellent results across their strategies, which deserve more attention.”
Gross will work out of a new Janus office in Newport Beach, Calif., where PIMCO is headquartered.
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