EKTEST Pimco CEO Mohamed El-Erian to Leave Pimco in March
Mohamed El-Erian abruptly stepped down as chief executive of Pacific Investment Management Co., the giant asset manager that has struggled to hold on to investors as demand for its bond funds wanes.
Mr. El-Erian, 55 years old, will leave in mid-March after seven years at the helm of the Newport Beach, Calif., firm, which manages $2 trillion as a largely autonomous unit of German insurer Allianz SE.
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His departure leaves Bill Gross, who founded Pimco in 1971 and who oversees the world's largest bond fund, as sole chief investment officer and the firm's primary public face.0
Pimco's effort to build a stock-fund business, launched under Mr. El-Erian, has faltered just as investors are turning away from bonds in search of higher yields from alternatives such as equities and junk bonds. Mr. Gross's Pimco Total Return Fund suffered industry-record outflows in 2013, when stocks posted their biggest gains in over a decade.
The firm has also trailed competitors such as BlackRock Inc. and Vanguard Group Inc. in expanding into index-based exchange-traded funds, which are drawing investors dissatisfied with the performance of active investment managers.
That contrasts with a few years ago, when investors poured hundreds of billions of dollars into high-rated bonds following the financial crisis, elevating the profiles of asset managers such as Pimco and BlackRock.
Investors yanked a net $41.1 billion from the Total Return fund in 2013, and Pimco's U.S.-listed mutual funds suffered $30.4 billion in withdrawals, their first since at least 1993.
"Equities seems to have been the area where [Pimco] has been behind competitors," said Eric Jacobson, senior fund analyst at Morningstar Inc. "Pimco has been very circumspect and deliberate in adding that business line."
Pimco promoted Douglas Hodge to CEO, putting an executive with experience in client relations and business back in the top management role.
Mr. Hodge, who joined the firm in 1989, is currently Pimco's chief operating officer. He previously led the firm's Asia Pacific region from Tokyo.
Mr. Hodge represents a shift from Mr. El-Erian, whose background is in investment and economics and who has been oft-quoted since the financial crisis on markets and the economy.
Pimco is also promoting a new generation of fund managers in naming Andrew Balls and Daniel Ivascyn as deputy chief investment officers. Mr. Gross, Pimco's co-chief investment officer with Mr. El-Erian since 2007, will become chief investment officer, the company said in a statement.
"I'm ready to go for another 40 years!" Mr. Gross, 69, said in a post on Twitter.
Mr. Ivascyn, in particular, has had a rising profile thanks to his chart-topping performance at the helm of the $30 billion Pimco Income Fund. Pimco Income is one of a growing number of "go-anywhere" bond funds that have been attracting investors looking for ways to play the bond market in a rising-rate environment.
In 2013, Mr. Ivascyn's fund took in $7.8 billion in new money from investors, having attracted $12.6 billion in 2012, according to Morningstar. Pimco Income is up nearly 11% a year for the last three years, a pace that nearly doubled the average returns of its competitors.
London-based Mr. Balls was often the public face for Pimco's views on the European debt crisis as head of the firm's European portfolio management.
Mr. El-Erian joined Pimco in 1999 as managing director and he was a senior member of Pimco's portfolio management and investment strategy group. He left the firm to become chief executive and president of Harvard Management Co., which manages Harvard's endowment and related accounts, before returning to Pimco two years later.
Mr. El-Erian will remain on the German parent company's International Executive Committee and advise on global economic and policy issues. In a note to Pimco clients reviewed by The Wall Street Journal, Mr. El-Erian said that in addition to remaining on the International Executive Committee, he "will also be doing some writing, particularly on central banking and market related issues."
"I have been extremely honored and fortunate to work alongside Bill Gross, who is one of the very best investors in the world," said Mr. El-Erian in the statement. "I have also been amazingly privileged to work with the most talented group of professionals in the investment management industry."
Mr. El-Erian played an important role on the firm's investment committee, which sets guidelines for Pimco's portfolio managers and evaluates the strategies being implemented among individual funds, said Mr. Jacobson of Morningstar.
Mr. El-Erian was "one of only a handful of people who likely have had the right mix of traits necessary to strongly challenge and help shape Gross's opinions," said Mr. Jacobson, who has followed Pimco's funds for years.
Mr. El-Erian also served as a co-manager on Pimco's $2.3 billion Global Multi-Asset Fund, which lost 8.4% in 2013, while the index against which it measures performance rose 26.7%.
In recent years, Pimco has invested in divisions beyond its core bond offerings, such as equities. In 2009, the firm hired Neel Kashkari, who oversaw the Treasury's Troubled Asset Relief Program during the financial crisis, to build a stock portfolio.
Building an equity portfolio has been slow going. The six funds had $10 billion in assets under management when Mr. Kashkari quit last year to consider a move into politics.
Mr. Kashkari, a Republican, formally declared his candidacy for governor of California Tuesday.
(END) Dow Jones Newswires
October 10, 2017 09:49 ET (13:49 GMT)