Gross Says Pimco Better After Changes Made on El-Erian Exit

Feb 04, 2014 1:18 pm ET

(Updates with redemptions from Pimco Total Return Fund in sixth paragraph.)

Feb. 4 (Bloomberg) -- Pacific Investment Management Co.’s Bill Gross said his firm is stronger now following the leadership changes triggered by Chief Executive Officer Mohamed El-Erian’s resignation on Jan. 21.

“I think we’re a better company now than we were a month ago and that is a big statement,” Gross said today in an interview with Erik Schatzker and Stephanie Ruhle on Bloomberg TV’s “Market Makers”.

Pimco named six deputy chief investment officers last week to emphasize the depth and breadth of its investment talent after the resignation of El-Erian, who shared the role of co- chief investment officer with Gross and was his heir apparent. El-Erian’s exit comes as investors are turning away from traditional bonds in anticipation that rising interest rates will curb returns, prompting record redemptions from Gross’s Pimco Total Return Fund last year.

Gross reiterated today that he was disappointed and surprised by El-Erian’s decision to leave the Newport Beach, California-based firm, and has said he tried to convince him to stay.

“I thought I fulfilled my job to find my successor, but obviously not,” Gross said today. “Pimco is moving on though.”

The $237 billion Pimco Total Return Fund had redemptions of $3.5 billion in January, the ninth straight month of withdrawals for the world’s largest bond fund and the lowest since May, according to estimates today from Morningstar Inc. Last year, Gross’s fund suffered $41.1 billion in net redemptions, the most ever, according to the Chicago-based research firm.

Fund Returns

Pimco Total Return fell 1.9 percent in 2013, behind 65 percent of peers, according to data compiled by Bloomberg. The fund has gained 1.6 percent this year through Feb. 3, ahead of 55 percent of similarly managed funds. The Barclays U.S. Aggregate Index declined 2 percent in 2013 and returned 1.9 percent this year through yesterday.

“Pimco believes that fixed income should be a key part of any diversified portfolio, whether it be institutional or retail, and we still see plenty of opportunities in the global market for bonds for the patient investor,” Mark Porterfield, a spokesman for Pimco, said in an e-mailed statement.

--Editors: Sree Vidya Bhaktavatsalam, Christian Baumgaertel