Vineer Bhansali is leaving Pacific Investment Management Co., where he was a managing director specializing in quantitative portfolios, to start his own investment firm.
Bhansali, who said he co-managed separate accounts and 28 funds with assets of about $50 billion at Pimco, is launching LongTail Alpha a week after the Federal Reserve raised the Fed Funds rate for the first time since 2006, one of several factors setting the stage for his venture.
“Considering where the market is in terms of implied volatility and risk, this is very much an optimal time,” Bhansali, 49, said in an interview Tuesday. “Tail-risk hedging by definition pays off when there’s big bear events. That’s when the strategy that we’ve used, which is an active management of the hedging portfolio, pays off.”
This year, Wendy Cupps, a managing director who oversaw Pimco’s product management, is retiring at age 53. Virginie Maisonneuve, Pimco’s chief investment officer for equities, resigned in May after the firm shrank its stock-picking unit.
“Pimco’s a great firm and has had a rough time,” Bhansali said. “But this business area and my timing is not related to that.”
Bhansali notified Pimco of his resignation Tuesday, according to the company.
Bhansali, whose expertise includes options pricing and portfolio construction, managed the $1.9 billion PIMCO 0-5 Year High Yield Corporate Bond Index Exchange-Traded Fund, which is down 6.2 percent in 2015, and the $1.1 billion PIMCO 1-5 Year U.S. TIPS Index ETF, which is down 0.6 percent this year.
He designed the algorithm behind the $414.5 million Pimco Trends Managed Futures Strategy Fund. Established in 2013, the fund invests in derivatives linked to interest rates, currencies, mortgages, credit, commodities and equity indices. It is down 8.8 percent this year.
The funds’ returns were negative because they were benchmarked to indexes that didn’t do well, he said.
LongTail Alpha is named after its strategy that “sustained portfolio performance comes from expecting the unexpected, and positioning portfolios to earn yield while maintaining convexity,” according to a statement he issued. Bhansali said he is initially funding the firm himself.
He earned a Ph.D. in theoretical physics from Harvard University in 1992 after receiving bachelor’s and master’s degrees in physics at the California Institute of Technology. He has worked at Pimco for 16 years following stints at trading desks at Citibank, Salomon Brothers and Credit Suisse First Boston.
“There were a lot of physicists and mathematicians building models for exotic options, which is kind of what I’ve dealt with the last 25 years,” he said. “It became so interesting that I postponed my post doc.”
(A previous version corrected the name of Pacific Investment Management Co. in first paragraph.)