Pimco is getting a bit of a shakeup as its parent company Allianz said late Tuesday that fund giant’s CEO and co-chief investment officer Mohamed El-Erian will be resigning from the company in March. Douglas Hodge is planned to replace El-Erian as CEO. El-Erian will remain with Allianz via its International Executive Committee.
El-Erian Leaves Pimco
El-Erian first joined Pimco in 1999, and rejoined the firm in 2007 after a two-year stint as the president and CEO of Harvard Management Company. In addition to working closely with bond king Bill Gross to help grow Pimco’s flagship Total Return Fund (PTTRX) (or in its ETF form, Total Return Fund ($BOND)), which manages about $237 billion in assets despite a rough 2013 in which the fund turned in its the worst performance since 1994 with a 1.9-percent decline. Investors responded by pulling out over $41 billion in assets.
El-Erian was also instrumental in leading the firm’s diversification outside of bonds.
“I have been extremely honored and fortunate to work alongside Bill Gross, who is one of the very best investors in the world” El-Erian said in a statement. “His talents are truly exceptional, as is his dedication. I have also been amazingly privileged to work with the most talented group of professionals in the investment management industry. Their commitment and tireless work on behalf of our clients have been a consistent inspiration for me since I first joined PIMCO back in 1999. I wish them continued great success.”
But El-Erian’s view of the market had become increasingly different from that of Gross, which of course led to speculation that the schism was the primary reason for his eventual resignation.
“Mohamed has been a great leader, business builder and thought leader for PIMCO and our clients,” Gross said in the Pimco statement. “Together we have guided the firm and served our clients during a period of significant change in the global economy and financial markets. We are pleased that he will remain a part of the Allianz Group.”
Douglas Hodge as Pimco’s New CEO
The management restructuring includes Hodge’s promotion from his current role as Pimco’s COO. Jay Jacobs steps in as President, while Craig Dawson will become Head of Strategic Business Management. On the portfolio management side, Andrew Balls and Daniel Ivascyn will become Deputy Chief Investment Officers.
“PIMCO has become one of the leading investment management firms in the world through a relentless focus on performance, innovation, and delivering value to our clients, and that will not change,” Hodge said. “The firm has made important progress over the past several years to become ‘Your Global Investment Authority’ by expanding the scope of our investment platform and business, and we will continue to execute on this vision.”
Hodge takes over in a somewhat critical time for Pimco as it readjusts its strategy in the Fed’s reduced-QE environment. The ability to diversify the firm’s products is another one of the major concerns. One of the realizations derived from the firm’s struggles in 2013 was that its decision-making process for the majority of its funds depended on the same macro calls.
But the chief question for Hodge—as well as the rest of the new leadership team—is whether they will have the ability to balance the dominant personality of Gross, who has become as close to a living legend in the financial realm as an individual could possibly get and whose name is synonymous with the firm.
The dynamic should certainly be different, as Hodge will not assume the Co-CIO role that El-Erian held, it will definitely be interesting to see the direction Pimco heads toward under the new leadership structure.
DISCLOSURE: The views and opinions expressed in this article are those of the authors, and do not represent the views of equities.com. Readers should not consider statements made by the author as formal recommendations and should consult their financial advisor before making any investment decisions. To read our full disclosure, please go to: http://www.equities.com/disclaimer