Allianz SE, Europe’s biggest insurer and owner of Pacific Investment Management Co., is standing by Chief Investment Officer Bill Gross as his main fund trails peers and struggles with a record streak of investor redemptions, calling him an industry “legend”.
Gross, who runs Newport Beach, California-based Pimco, has given no indication that he will step down and is “even more invigorated” as Pimco begins to improve performance from its biggest fund, Jay Ralph, the German insurer’s management board member responsible for asset management, said in an interview.
“We want Bill Gross to work as CIO for as long as he is willing and able,” Ralph, 55, said in Munich last week.
Allianz Chief Executive Officer Michael Diekmann was forced to defend Pimco against shareholder criticism during the insurer’s annual meeting in May as Gross is lagging behind rivals for the third year in four and investors have pulled $64 billion from his Pimco Total Return Fund since May 2013. Gross, 70, has also come under scrutiny for his management style since the abrupt resignation in January of former CEO Mohamed El- Erian, whose departure was followed by reports of clashes between the two men. Gross has offered to resign several times over the past seven years, including when El-Erian’s submitted his resignation, the Wall Street Journal reported on July 14.
“Bill never gave us an indication that he wants to resign,” Ralph said. “The only time he is unhappy is if he doesn’t have a day of outstanding performance.”
Ralph and Diekmann said they see no reason to tighten control of Pimco’s operations after responding to El-Erian’s departure by naming Douglas Hodge as CEO and appointing six deputy investment chiefs including Daniel Ivascyn, Virginie Maisonneuve and Andrew Balls.
“Bill Gross has always been an outstanding investment manager,” Diekmann said in e-mailed comments to Bloomberg. “We are convinced that he and his team at Pimco are very well positioned to continue to be successful and we fully support the new management structure.”
While Pimco’s total assets under management rose by $53 billion to $1.97 trillion through the first half of the year, the Total Return Fund has shrunk to $225.2 billion as of June 30 from $237 billion in December, according to Chicago-based research company Morningstar Inc.
The fund advanced 3.7 percent this year through July 17, behind 55 percent of similarly managed funds, according to data compiled by Bloomberg. Over the past month, Pimco Total Return climbed 1 percent, ahead of 96 percent of peers, the data show.
“When I met Bill Gross last week, he was feeling more positive because the investment performance was turning and he’s even more invigorated by the investment discussions today,” Ralph said.
Redemptions at the Total Return Fund are the result of investors shifting from core strategies to non-core strategies, said Ralph, who became a member of Allianz’s management board in 2010 and took the helm at the asset management units in 2012.
“To focus on a single fund, where people’s investment allocations are changing, is the wrong way to look at it,” he said. “Gross is the CIO of the whole firm and manages strategies in addition to the Total Return Fund.”
El-Erian, who left amid clashes with Gross that painted the Pimco co-founder as an autocrat who didn’t tolerate dissent, had shared the role of co-chief investment officer with Gross. He now works for Allianz as chief economic adviser.