PIMCO Bleeding Without Bill Gross, Layoffs Loom
Officials at mutual fund giant Pacific Investment Management Co., are discussing layoffs amid a sharp decline in assets over the past year that followed the ouster of co-founder Bill Gross, the FOX Business Network has learned.
Pimco, based in Newport Beach CA., has lost nearly 25% of its total assets since March of 2014, and investor withdrawals continued following the September 2014 departure of Gross, who also ran the firm’s vaunted Total Return Fund (NYSE:PTTRX)—known for its massive size and a history of outsized returns that abated during Gross’s last year at the firm.
Without Gross at the helm, the Total Return Fund has produced a return of about 1.6%--beating both the Standard & Poor 500 index of large company stocks, and a bond index compiled by Morningstar Inc. (NASDAQ:MORN), which tracks mutual fund performance.
But investors continue to yank money from the company and the total return fund in particular; as of August 31, the total return fund reported assets under management of $98.1 billion—the first time the fund has fallen below $100 billion in assets since 2007. Since Gross left the company, overall assets have fallen nearly 21% to $1.5 trillion.
The decline in assets-- despite the strong fund performance-- has senior management of the company contemplating layoffs, according to people with direct knowledge of the matter. Mutual funds earn fees off of assets under management, thus the fund company may have to enact staff cuts to make up for the shortfall in revenues, these people add.
A spokesman for Pimco, a unit of Allianz SE, had no comment but would not deny the possibility of layoffs or the management discussions of job cuts.
Pimco employs roughly 2,400 people though it’s unclear how deep into the workforce management might cut if the layoffs occur. As of now, managers have been looking at areas of redundancy as they formulate possible staff cuts, later in the year, these people say. No final decision has been made.
Pimco has been rocked by a number of controversies over the past year in addition to Gross’s high profile exit; aside from the management turmoil at the top of the firm which resulted in Gross’s ouster, the firm is being investigated by the Securities and Exchange Commission for the way it prices bonds in its exchange traded fund that mimics the Total Return Fund, the company has disclosed.
The SEC issued Pimco a so-called Wells Notice, meaning the commission’s enforcement staff is recommending the filing of formal civil charges against the firm for possibly inflating returns in the ETF.
A Pimco spokesman had no immediate comment on the investigation.