PIMCO’s announcement on Tuesday that CEO and co-CIO Mohamed El-Erian would soon leave those roles but stay on as a board member of parent company Allianz continued to ripple through the financial world on Wednesday.
Morningstar analyst Eric Jacobson, among others, shared the mixed views of other experts on the news affecting the Newport Beach, Calif.-based bond shop, which had close to $2 trillion in assets under management as of Sept. 30.
“I think it’s of minimal short-term significance, but could potentially have a very long-term impact on the firm,” Jacobson said in an interview with ThinkAdvisor.
Also, the Morningstar expert doesn’t think El-Erian was nudged out.
“I don’t believe that PIMCO’s outflows or the Total Return Fund’s 2013 difficulties likely had much to do with this departure, nor do I expect that he was pushed,” Jacobson said.
Others, like Chip Roame, managing principal of Tiburon Strategic Advisors, agree. “I highly doubt he was pushed out because of one off year,” the consultant said in an interview.
His exit, more likely, is related to other issues. “He has been a very busy guy, making appearances everywhere on behalf of PIMCO. He relocated to Boston a few years ago [to work for Harvard’s endowment] and then went back. He may just need a break, or he may want to do something different,” Roame added.
Still, PIMCO’s reorganization may be tied at least partially to its poor showing last year, when the PIMCO Total Return Fund (PTTAX, PTTRX) had about $41 billion of outflows. It lost 2.3% in 2013 vs. losses of 1.3% for its category, according to Morningstar. Its asset base is about $237 billion; the fund’s ETF shares (BOND) are about $3.5 billion.
Several other PIMCO funds did have inflows in 2013, Jacobson says. “Overall, the firm saw $25.9 billion in net outflows from mutual fund and ETF businesses (combined), which is a relatively modest sum compared with the firm’s overall assets under management,” he noted.
El-Erian has been a lead manager of two funds: PIMCO Global Advantage Strategy Bond (PGSAX) and PIMCO Global Multi-Asset (PGMAX), which have total assets of $3.5 billion and $2.3 billion, respectively. The multi-asset fund declined 8% in 2013 while funds in its Morningstar category improved 9% in the same period.