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New CEOs at Vanguard, Pimco

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Bill McNabb has succeeded Jack Brennan as Vanguard’s CEO, making him the third CEO in Vanguard’s 33 years as an investment firm. Brennan remains chairman of the board. Upon taking the leadership spot at Vanguard — which has some $1.25 trillion in assets under management — McNabb shared his views on the company, the markets and the future.

When asked about what changes shareholders can expect, McNabb says, “One of the many things that I learned from Jack Brennan during the 22 years that we have worked together is that change is good for an organization, its clients and its employees.

“I will face the same challenge that Jack did when he assumed the CEO role 12 years ago: balancing the core values that make Vanguard great with the need to change and innovate to make us better for our clients.”

In terms of Vanguard’s performance in the current market environment, the new CEO explains, “One of Vanguard’s great strengths is the diversification of our fund lineup. Unlike many firms that tend to see cash flows concentrated in one fund type, such as money-market funds or stock funds, Vanguard has cash flows that have been roughly split 50/50 between stock funds and fixed-income funds. That balance is a great source of strength for us. We continue to experience strong flows into index funds, both traditional and exchange traded (ETF) share classes. Four of our five top-selling funds are index funds …

“From an investment-management perspective, some of our equity funds have held up quite well on a relative basis, but others have been hurt by overweight positions in some of the harder-hit sectors of the market, like financials and technology,” McNabb shares.

“With the broad range of our fixed-income funds, our portfolio managers and credit analysts have done an extraordinary job during this tough environment. Vanguard bond funds typically receive recognition for their ultra-low costs, but the expertise and experience of our fixed-income team often goes unrecognized,” he says. “Vanguard is one of the largest bond shops in the world, managing more than $400 billion in assets.”

Pimco, with roughly double this amount of total assets under management and a global reputation for its fixed-income products, has announced that CEO Bill Thompson will retire at year-end, after 15 years in the position. Co-CEO Mohamed A. El-Erian, who returned to Pimco in January 2008 from Harvard, has been elected to serve as CEO upon Thompson’s retirement. El-Erian also will remain co-chief investment officer with Bill Gross.

According to Pimco, the firm has grown from one office and 125 employees with $40 billion in AUM to 9 offices worldwide, 1,000-plus employees and some $840 billion of client assets in the past decade and a half.

“PIMCO is going from ‘strength to strength’ as Mohamed takes the CEO reigns from Bill [Thompson],” says Gross.

“We are also fortunate to have world-class leaders such as Bill Gross and Mohamed El-Erian to help guide the firm’s future growth,” explains Joachim Faber, CEO of Allianz Global Investors, Pimco’s parent company.

Thompson plans to remain available to both Pimco and Allianz for various projects and consultations and will pursue personal projects, including serving on several corporate boards and engaging in philanthropic activities.

According to Financial Research Corporation, the Pimco Total Return Fund has had about $15 billion in asset inflows during the first seven months of 2008, making it the only one of the top 25 mutual fund groups to experience positive asset growth year to date.

Janet Levaux, MBA/MA, is the managing editor of Research; reach her at [email protected]


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