Pimco's Bill Gross presents Allianz with a dilemma. The world's largest bond manager, owned by the German insurance giant, faces a sharp decline in profit this year. Gross, Pimco's legendary founder, has a strong record to fall back on. But his German masters, who bought control of Pimco in 2000, can't ignore the question of replacing him.
The U.S. fund manager had a hard time in the second half of 2013 and this year could be still more difficult. Third-party assets under management shrank by a hefty 10 percent to 1.1 trillion euros in 2013. While three-quarters of the drop stemmed from currency swings and rising bond yields, some clients fell out of love too: net outflows accounted for about 20 billion euros. Allianz expects operating profit in asset management to drop by 8 to 21 percent this year.
Meanwhile, Mohamed El-Erian, Pimco's chief executive and co-chief investment officer, quit abruptly in January. According to a Wall Street Journal report this week, tougher times for the business coincided with worsening clashes between the larger-than-life Gross and his long-time foil, the sober El-Erian.
Allianz made the best of the situation by naming El-Erian its chief economic adviser, and the parent is supporting a re-shuffle at the top of Pimco. Rather than sharing power with a new co-CIO, the 69 year-old Gross now has six deputies. Yet this smacks of a stopgap approach. The risk is that the large squad in the second tier may actually intensify rather than dilute Gross' grip on power, at a time when both his performance and his style arguably need monitoring.
Gross doesn't seem to be ready to leave soon. After El-Erian resigned, he tweeted: "I'm ready to go for another 40 years!" And despite the swirl of gossip kicked up by the Journal, Allianz's steady hand may be justified for the time being. Gross deserves the benefit of the doubt given his record. And the Germans stress that succession plans for the top people at Pimco are in place. All the same, they should probably get out to California more often. Allianz cannot afford to wait until Gross's 109th birthday to decide who will take over.
Source: Reuters
The U.S. fund manager had a hard time in the second half of 2013 and this year could be still more difficult. Third-party assets under management shrank by a hefty 10 percent to 1.1 trillion euros in 2013. While three-quarters of the drop stemmed from currency swings and rising bond yields, some clients fell out of love too: net outflows accounted for about 20 billion euros. Allianz expects operating profit in asset management to drop by 8 to 21 percent this year.
Meanwhile, Mohamed El-Erian, Pimco's chief executive and co-chief investment officer, quit abruptly in January. According to a Wall Street Journal report this week, tougher times for the business coincided with worsening clashes between the larger-than-life Gross and his long-time foil, the sober El-Erian.
Allianz made the best of the situation by naming El-Erian its chief economic adviser, and the parent is supporting a re-shuffle at the top of Pimco. Rather than sharing power with a new co-CIO, the 69 year-old Gross now has six deputies. Yet this smacks of a stopgap approach. The risk is that the large squad in the second tier may actually intensify rather than dilute Gross' grip on power, at a time when both his performance and his style arguably need monitoring.
Gross doesn't seem to be ready to leave soon. After El-Erian resigned, he tweeted: "I'm ready to go for another 40 years!" And despite the swirl of gossip kicked up by the Journal, Allianz's steady hand may be justified for the time being. Gross deserves the benefit of the doubt given his record. And the Germans stress that succession plans for the top people at Pimco are in place. All the same, they should probably get out to California more often. Allianz cannot afford to wait until Gross's 109th birthday to decide who will take over.
