By Kirsten Grind and Julie Steinberg
Pacific Investment Management Investment Co. announced a
restructuring of its leadership on Wednesday that shifts the
balance of power at the giant money manager away from founder Bill
Gross.
The moves comes less than a week after Pimco said its chief
executive officer, Mohamed El-Erian, would step down in mid-March
and as the firm deals with large outflows from its signature bond
fund and an equities business that has yet to gain traction.
Mr. Gross said in an interview with The Wall Street Journal on
Wednesday morning that the appointments of four new deputy chief
investment officers, in addition to two named last week, are
designed to show investors that Pimco isn't just a bond shop.
Several of the new appointments have specialties outside of
fixed-income, which has long been Pimco's primary business. Pimco
manages about $2 trillion, including Mr. Gross's Total Return fund,
which is the largest bond fund in the world.
"It's going to be a little different and more strategic, with
more balance between them," Mr. Gross said. "They're going to be
more empowered to operate more in their respective areas."
The moves effectively tilt the balance of power away from Mr.
Gross, who previously split investment-decision duties with Mr.
El-Erian. Mr. Gross, 69 years old, says he will run investment
committee meetings one day a week now, and allow his six deputies
to run them on the other days.
"Frankly, as I always told Mohamed, I always thought I did
better when he was leading as opposed to when I was," Mr. Gross
said. "When you lead you have to make sure everyone has a chance
and there's lunch served and you have to be a host. I'm better from
the side sometimes than the front."
Mr. Gross's Total Return Fund saw record outflows of $41.1
billion last year, and had $237 billion under management at the end
of 2013. The fund posted a loss in 2013 of 1.92%.
"There will be those times when the bond market has a minus side
in front of it and that was 2013," Mr. Gross said. "The Total
Return Fund will stay, in my humble judgment, the largest bond fund
in the world."
Douglas Hodge, Pimco's newly appointed chief executive, said in
an interview Wednesday that he will focus on building out the giant
money-manager's equity business, an area it has struggled to grow
in the past.
Mr. Hodge, 56 years old, is replacing Mr. El-Erian, who spent
seven years atop the Newport Beach, Calif. firm, a unit of German
insurer Allianz SE.
Mr. Hodge said Pimco will build out its equity business
internally and not through acquisition.
"We've been bond managers for forty years, but we all recognize
that because we serve a broader clientele, we have to evolve as
well," Mr. Hodge said.
Pimco's push into equities has been slow going. The firm's six
stock funds had just $10 billion in assets under management last
year after the firm's former head of global equities, Neel
Kashkari, departed. The firm, known for its fixed-income prowess,
has $2 trillion under management but also saw outflows in its bond
funds last year amid a stock-market rally.
Unlike Mr. El-Erian, who also served as co-chief investment
officer, Mr. Hodge said he would focus solely on the direction of
the company, and won't manage any money. Mr. Hodge also said he
won't be the public face of Pimco like Mr. El-Erian, in part
because he won't be managing money and doesn't have the same
international public-policy background.
"I'm not Mohamed," Mr. Hodge said. "To the extent that I have a
public presence, my focus will be different."
Pimco previously named Andrew Balls and Daniel Ivascyn as deputy
chief investment officers.
The firm on Wednesday announced the appointments of four new
deputy chief investment officers. Mr. Hodge said the moves are an
attempt to develop talent around Mr. Gross.
"We look at what we've done in terms of the deputy [chief
investment officers] and firmly believe that it positions us well
for the future," he said.
Pimco named the following as new deputy chief investment
officers: Mark Kiesel, a managing director in the Newport Beach
office and global head of the corporate bond portfolio management
group; Virginie Maisonneuve, London's managing director and global
head of equities; Scott Mather, a Newport Beach managing director
and head of global portfolio management; and Mihir Worah, another
Newport Beach managing director and head of the real return
portfolio management team.
The company also appointed former employee Sudi Mariappa as
managing director and generalist portfolio manager in Newport
Beach.
The appointments are a way to show clients "not only that there
is a very strong team ready to step up, but that it's a fairly
large team and that they want these folks to have a higher profile
outside the company, " said Eric Jacobson, senior fund analyst at
research firm Morningstar Inc. The moves "reassure clients they're
taking succession planning very seriously," he said.
In addition, the firm said on Wednesday that managing director
and equities portfolio manager Charles Lahr will leave the firm to
pursue other opportunities. Marc Seidner, managing director and
portfolio manager, is also stepping down to take a job in
Boston.
Write to Kirsten Grind at kirsten.grind@wsj.com and Julie
Steinberg at julie.steinberg@wsj.com
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