Pimco’s Gross Relaxes Grip by Giving Deputies More Flexibility

Jan 29, 2014 3:56 pm ET

Jan. 29 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross is giving the firm’s six new deputy chief investment officers more autonomy in a leadership overhaul spurred by Mohamed El-Erian’s decision to quit as chief executive officer.

“Each individual deputy CIO will have some empowerment that probably was lacking to some extent in the past, so that will improve,” Pimco co-founder Gross said in a telephone interview today from Newport Beach, California.

Pimco has reorganized its senior leadership to emphasize the depth and breadth of its investment talent after the Jan. 21 resignation of El-Erian, who shared the role of co-chief investment officer with Gross and viewed as his heir apparent. Gross, who co-founded the firm in 1971 and has historically led the committee that sets Pimco’s investment guidelines, said managers will have more room to make investing decisions in reaction to market moves without the committee’s immediate involvement.

The firm named Dan Ivascyn and Andrew Balls as deputy CIOs last week and appointed four more executives to that position today. Mark Kiesel, global head of the corporate bond management group; Virginie Maisonneuve, global head of equities; Scott Mather, head of global fund management; and Mihir Worah, head of the real return group will join Ivascyn and Balls as deputy CIOs, Pimco said in a statement today.

The firm also announced the departures of Charles Lahr, an equities manager, and Marc Seidner, a generalist fund manager, amid the promotions. Pimco rehired Sudi Mariappa as a generalist fund manager to take over responsibilities for Seidner, who is leaving Pimco to return to Boston, Gross said. Mariappa will come to Pimco from GLG Partners Inc., where he has been since 2012.

More Flexibility

The six deputy CIOs will oversee two to four different groups and have more flexibility to make decisions, said Gross. Some of them will be given seats on the investment committee, which sets investing guidelines for funds.

Pimco’s investment committee, which was led by Gross and El-Erian and is generally comprised of fewer than a dozen permanent and rotating members, is the driving force behind the positions of its funds. By adding these new members, the investment committee will be more focused on strategy and markets rather than policy set by the Federal Reserve, according to Gross.

“You can’t just do what you want, but you will be able to react to markets a little quicker rather than wait for the investment committee to meet at noon,” Gross said.

Gross’s Misjudgment

Last year, Gross’s misjudgment on the timing and impact of the Fed’s plan to scale back its asset purchases spurred the biggest decline for the $237 billion Pimco Total Return Fund in almost two decades and the mistake was echoed by some of its largest funds. While Pimco’s non-traditional products have the flexibility to navigate across the fixed-income spectrum, some weren’t able to avoid losses because they’re guided by Pimco’s world view on everything from the global economy to interest rates.

With Maisonneuve, who joined the firm this month to help attract assets into equities and improve performance, becoming a deputy CIO, it’s a “strong message” that stocks are important to Pimco, Doug Hodge, who will replace El-Erian as CEO, said today in a telephone interview.

Maisonneuve will participate in the investment committee, a departure from how “equities weren’t really represented at the table before,” Gross said.

--Editors: Sree Vidya Bhaktavatsalam, Christian Baumgaertel