Top brass at Pacific Investment Management Co. may have started making pleas to financial advisers around the world this week, but that doesn’t mean those advisers are listening.
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Pimco began a full-fledged damage control campaign on Monday in an attempt to convince clients to stick with the firm, but several wealth management executives at Morgan Stanley did not even bother listening to Pimco’s conference call on Monday afternoon.
“For us there was no question that this wasn’t a company we wanted to be involved in anymore, and we immediately took out 100% of our clients’ holdings on Friday,” one executive said. “It will be six to twelve months before we even think about putting money back there again,” they added.
Over the weekend, FOX Business reported that Pimco is bracing for a deluge of redemptions in the coming weeks, primarily from its flagship fund that invests in bonds in the wake of last week’s abrupt departure of its co-founder, Bill Gross, financial advisers who deal with the company say. The company was buried with calls on Friday from financial advisers demanding answers to breaking news that Gross—the firm’s chief investment officer who also ran Pimco’s $221 billion Total Return fund—had left to join rival asset manager Janus Capital Group (JNS).
Investors withdrew more than $500 million from the Total Return Fund alone on Friday, and billions from other funds, but with some purchases it's unclear how much money ended up flowing out of the fund company, advisers with first-hand knowledge of the matter tell FOX Business. Senior Pimco executives are preparing for as much as $60 billion of investor cash leaving the massive bond fund, not to mention the slew of other investment vehicles Pimco manages, according to people familiar with the matter.
As news of Gross’s departure set in Friday, senior executives also scrambled to obtain credit facilities to meet the possible customer redemption demands, advisers say. At least for now, those demands for cash by investors haven’t been overwhelming for the firm, which has $2 trillion under management, advisers say.
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Pimco funds are sold primarily through financial advisers, and based on the tone of those calls, combined with the acceleration of redemption requests during the course of the day on Friday, company officials are bracing for significant money flowing out of the TRF, and possibly the entire company in the coming weeks, advisers add.
“The company knows that many financial advisers are telling their clients to switch from Total Return to the fund that Gross will run at Janus,” said one adviser.
But not all advisers are as keen to follow Gross. “We won’t be putting money in Janus funds,” one adviser said. “Bill Gross is a moron and we have no interest in following him,” they added.
A spokesman for Pimco wouldn’t deny the firm’s concern about redemptions and declined further comment. A spokesman for Gross also had no comment.
The 70-year-old Gross—known as the “bond king”—is an iconic figure on Wall Street. In 1971 he co- founded Pimco, now one of the world’s biggest money-management firms that specializes in bonds. His Total Return Fund, launched in 1987, has had one of the best-long term records in the financial business, showing strength particularly during the 2008 financial crisis. Gross sold Pimco to German insurer Allianz SE in 2000, but the company operates largely independent of its parent.
With that sale TRF attracted tens of billions of dollars in new investor cash. But Gross’s record in recent years has been erratic; management at the once smooth-sailing firm -- that Gross as its chief investment officer ran with an iron fist-- began to show signs of strain with the departure of its former chief executive Mohamed El-Erian earlier in the year. Since last year, investors have yanked nearly $70 billion out of the TRF.
“This is clearly a firm with a lot of issues,” one adviser added.