Gross Calls PIMCO Turmoil ‘Near-Death Experience’

The bond guru opens up on what El-Erian’s departure and its aftermath have been like

PIMCO founder Bill Gross (Photo: AP) PIMCO founder Bill Gross (Photo: AP)

As advisors and investors look on (or withdraw assets) as PIMCO's saga continues, co-founder Bill Gross is — unsurprisingly — having trouble keeping his spirits up. What may not have been anticipated, though, is how honest he is being about the situation, which erupted in January when then-CEO Mohamed El-Erian said he was leaving the firm.

“It’s been like a near-death experience, an emotional blow,” Gross said in a cover story in this latest issue of Bloomberg BusinessWeek. “Whenever I read the newspaper, “I say to myself, ‘At least my wife loves me.’ ”

Investors haven’t exactly been loving PIMCO lately.

The PIMCO Total Return Fund fell 1.2% in the year ended March 31, according to Bloomberg. That puts it behind close to 90% of similar funds. Plus, its volatility (4.3) was higher than the group average (3.6), and over the past five years, the flagship fund’s risk-

This performance prompted investors to withdraw some $40 billion from Total Return in 2013 and another $8 billion in early 2014, adds Bloomberg.

Happier Times

El-Erian joined PIMCO in 1999. He left in 2006 to run Harvard’s endowment for nearly two years, and then returned.

“Mohamed and I, we sort of settled in like a married couple,” Gross told Bloomberg Businessweek’s Sheelah Kolhatkar.

“When clients would come in — and they are our most important consideration — they’d come to see the trading room, but it was obviously to see us,” he added. “We’d jointly greet clients, and — ‘Mohamed, what do you think?’ ‘Bill what do you think?’ — We would act as a team.”

Thus, when El-Erian announced his second departure, Gross took it very, very hard.

 “I begged, as much as a man in my position can beg,” he said. “I didn’t get on my knees, but — ‘Don’t leave. What are you doing? Don’t!’ And at some point it was, ‘All right, already.’ ”

The toll was steep for both professional and personal reasons, the bond guru says, and not just for him.

“It was bad for everybody,” he explained. “We said, ‘What are we going to do now?’ So, I started to think about the things that he did—I’m not hopping on a plane and going to Abu Dhabi and going to Munich and London, I’m too old for that stuff! Who’s going to do that? You can’t leave, you’re the CEO who travels around the world and represents PIMCO! So we’re still getting used to that.

“Then the aftermath," he said to Kolhatkar, "I never expected that.”

According to Gross, El-Erian did not give a full reason for leaving the firm, just saying: “I’m not the man to lead the company forward.”

When The Wall Street Journal story broke in February about Gross’ alleged stifling of dissent — the story Gross refers to as “the crusher” — he became self-reflective.

 “People have different impressions of themselves, and where reality lies is somewhere in between. And maybe I hadn’t been forced to be in between. I always thought of myself as being part of a family and sharing and, yes, leading, but not forcing people to do anything. And so it was almost like a metaphysical few months where I was, like, is this me?” Gross told Bloomberg.

“Sort of like the caterpillar in Alice in Wonderland — instead of who are you, who am I? That’s been the most upsetting part. Are they right? Or am I right?” he asked.

But Gross, who now works with appointed CEO Doug Hodge and six deputy chief investment officers, may be getting his bearings.

“Our Gross has not been a happy camper for the last two months,” he said, referring to himself in the third person. “But an unhappy captain still has to steer the ship through the rocks.”

 

Page 1 of 2
Single page view Reprints Discuss this story
This is where the comments go.

Related

Bill Gross Lays Out Bond Strategy as PIMCO Bleeds

In PIMCO's fight for bond investors, Bill Gross is throwing down the gauntlet squarely in the conservative camp, ceding higher...