Bill Gross Exit Leads to Outflows at Pimco

Following the resignation of former CEO Mohammed El-Erian in January, Mr. Gross resigned this week from the company he co-founded in 1971. He has also announced that he will be moving on to Janus Capital Group. Even though his resignation was hastened by the possibility of being fired, the move still came as a surprise to many investors.

At Pimco, 10 billion dollars have already been withdrawn by investors—and some are predicting a loss of at least 100 billion or more in assets due to withdrawals. These outflows come after investors yanked a 41.1 billion in 2013 from Pimco’s Total Return fund, an industry record. August 2014 was also the 16th straight month of investor outflows at the TRF fund—with a net outflow of 3.94 billion in August alone.

While current chief executive Douglas Hodge is quick to point out the firm “manages nearly $2 trillion in assets, and we are confident that the vast majority of our clients will continue to stand with us”—many are predicting that there is a good change Pimco will lose its dominant position as a fixed income asset manager. Doubleline Capital, a Pimco competitor, has already begun to capitalize on the situation by overseeing “its largest inflow of the year, taking in hundreds of millions of dollars.”

With Mr. Gross moving on to Janus Capital Group, he will be managing a newly created Janus Global Unconstrained bond fund. Janus shares have surged over 20% after the news hit that he would be working for the firm. Mr. Gross has publicly commented that he looks forward to “returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization.” While it is still unclear whether the change in role will allow him to prosper in a bond market that has been experiencing historically low yields for an extended period of time due to Fed actions—it is clear that Mr. Gross exit has had a significant effect on Pimco’s long term outlook.

By: Ioannis Morales

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