U.S. investment legend Bill Gross is turning his back on Allianz fund subsidiary Pimco after a dispute over its future strategy. The 70-year-old stepped down with immediate effect on Friday, announcing a move to U.S. asset manager Janus Capital. In doing so, the billionaire forestalled his expulsion from Pimco, as a person familiar with the matter told the Reuters news agency.
The Pimco founder, long hailed in the markets as the “bond king,” reportedly clashed regularly with other top executives at the group. Gross had known that he would have been fired by Pimco. Recently, his flagship fund did not run as before because of the low interest rates. Investors were horrified by the departure Allianz shares lost 7.4 percent at times.
The company is grateful for all Gross has done for the firm and its clients over the past 43 years, said Pimco CEO Douglas Hodge. “As this year has progressed, however, it has become increasingly clear that the company’s senior leadership and Bill have fundamentally different views on how to move forward with Pimco,” Hodge acknowledged. The Newport Beach, California-based company has a succession plan and is prepared for the time without Gross, he said.
Gross is one of the best-known bond traders in the world. When he lowered his thumb over certain government bonds or mortgage securities, it moved prices around the globe. Investors were beating a path to the door in the best of times. The Pacific Investment Management Company (Pimco), which Allianz acquired in 2000, was founded by Gross in 1971. Europe’s largest insurer significantly expanded its asset management with the deal. Suddenly, the Munich-based bank was able to compete with industry giants such as Blackrock. Today, the division manages around 1.8 trillion euros.
Gross and his colleagues at Pimco delivered reliable profits for years and were therefore given a long leash by Allianz. But in the end, Pimco’s top investment boss ran out of luck. Against the backdrop of the financial crisis and permanently low interest rates, many bets no longer worked out, and Gross’ flagship fund Total Return no longer yielded the hoped-for profits for investors. Investors have been pulling money out of the world’s largest bond fund for months – about $25 billion this year alone.
Pimco’s lack of form was already driving Allianz shareholders crazy at its annual meeting in May. Gross’ spectacular falling out with his long-time partner Mohamed El-Erian, which was reported in the media at the beginning of the year, also caused displeasure.
In the future, Gross, who is ranked 252nd richest U.S. citizen by “Forbes” magazine with an estimated fortune of $2.3 billion, wants to try his luck at Janus Capital. The Denver-based firm, which also has offices in Europe and Asia, most recently managed funds totaling $178 billion. Anticipation is high for Gross in Denver. Janus shares shot up by about a third on the New York Stock Exchange.