Departure of Pimco's Gross stuns investing world
Bill Gross, a familiar name to many in the investing world, abruptly announced his resignation from the Pacific Investment Management Corp. (Pimco), a firm he co-founded in 1971, effective Monday. Many financial pundits who have closely followed Gross' career for decades were stunned by the news.
"It is surprising" Russel Kinnel, director of mutual fund research for Morningstar, told CBS MoneyWatch. He notes that the fund Gross managed at Pimco had been a weak performer recently. "They made some wrong calls," he said, such as a when Gross wrongly predicted a few years ago that interest rates would rise when they fell. Kinnel also wrote in a research note on the company's website, "While it is not a shock to see Gross depart, it is a big surprise to see him leave so quickly and to a competitor."
His views were echoed by Matt Hougan, president of ETF.com, which tracks the industry. He noted that many small investors hold Pimco funds in their portfolios. Several institutional investors placed their investments with the company under review, according media reports."Bill Gross is of the most famous bond investors in the world," he said in an interview. "It's shocking, somewhat unsettling news to see him depart for a competitor with effectively zero notice."
The 70-year-old will join Janus Capital Group (JNS), where starting October 6 he will manage the Janus Global Unconstrained Bond Fund and will "be responsible for building-out the firm's efforts in global macro fixed income strategies," according to a press release from the Denver-based company. He will work out of an office Janus is opening in Newport Beach, Calif. ,where Pimco is also based.
Shares of Janus, best known for its equity investing prowess, rose 36 percent to $15.17 on the news while U.S. shares of Pimco's parent company Allianz (AZSEY), which is based in Germany, slumped 6 percent to $16.48.
As the Wall Street Journal noted, Gross' departure comes as the Securities & Exchange Commission investigates claims that Pimco's Total Return exchange traded fund -- which he managed for decades and is marketed toward smaller investors -- artificially inflated its returns. Pimco, which has also been criticized for the fund's poor performance, has denied wrongdoing.
Gross' autocratic management style came under scrutiny earlier this year after the sudden resignation of Pimco's well-liked CEO Mohamed El-Erian. According to CNBC's David Faber, Gross was going to be fired tomorrow for what his sources described as "increasingly erratic behavior." Gross' speech at an industry conference run by Morningstar in June raised concern among observers.
A statement from Pimco cited by CNBC acknowledged that the firm's relationship with Gross had soured. CEO Douglas Hodge noted in a press release that while the firm was grateful for Gross' contributions "over the course of this year it became increasingly clear that the firm's leadership and Bill have fundamental differences about how to take Pimco forward." He added that a successor to Gross would be named quickly.
Pimco has $1.9 trillion in assets under management.