NEWPORT BEACH, Calif. -- Columbus Circle Investors is the second firm to bow out of PIMCO Advisors Holdings LP in the past year because the focus of the subsidiary no longer meshed with the desires of the larger organization.
Columbus Circle's leadership became disenchanted when the holding company launched a new subsidiary, PIMCO Equity Advisors, in January, taking $5.5 billion -- half of the firm's assets under management -- in equity mutual fund subadvisory work from Columbus to create the new business.
Last October, PIMCO Advisors Holdings, Newport Beach, Calif., sold its 75% ownership in Blairlogie Capital Management to Alleghany Asset Management, Chicago, after the Edinburgh, Scotland, money managers requested an end to the relationship. Blairlogie officials felt that Oppenheimer Capital, which PIMCO bought in 1997, would overshadow Blairlogie. Blairlogie manages international equity assets; Oppenheimer manages primarily U.S. value equity.
PIMCO's new equity entity focuses solely on retail investors, something Columbus was unwilling to do, said Stephen Treadway, PIMCO executive vice president.
"We needed those bread-and-butter funds they (Columbus) had -- the large-cap, small-cap and midcap -- but they have to sell them, take calls, give information and make visits," he said. "If you're serving institutional accounts at the same time, you have to decide where the focus will be."
The action came on the heels of another change at Columbus -- the departure at the end of 1998 of the four-person international investment team headed by Andrew Jacobson. The team started Axiom International Investors, and subadvises some Columbus accounts. International investments are now handled at Columbus by Managing Director Clifford Fox.
But it was the transfer of the mutual fund assets to PIMCO Equity Advisors that had the most profound effect on Columbus. Columbus portfolio manager Dennis McKechnie moved to PIMCO Equity Advisors along with the funds. Columbus equity portfolio manager Amy Hogan departed because the funds she had managed had been transferred to the new unit.
The uncertainty created "a headhunting frenzy" at the firm, said Don Chiboucas, president.
Once an alarm is sounded that talent might depart, consultants won't give you new business, and clients re-examine their relationships with you, he added.
Officials at PIMCO officially withdrew July 2 as a partner in the firm. Mr. Chiboucas now owns the company along with Mr. Fox and managing directors Marc Felman, Robert Fehrmann and Anthony Rizza.
Columbus will continue to pay PIMCO quarterly revenue-sharing payments until the sale price is paid; terms were not disclosed.
Columbus started in the early 1970s as the in-house investment arm of Gulf+Western Industries Inc. to manage pension and insurance assets. It was sold to Thomson Advisory Group LP, New York, in 1985. PIMCO Advisors was created in 1994 through properties held by Pacific Mutual Life Insurance Co. and Thomson Advisory.
At the time of the merger, Pacific Mutual had five investment subsidiaries, and Thomson had three. Now, only three small boutiques (all originally held by Pacific Mutual) remain under the PIMCO holding company:
* Cadence Capital Management, Boston, a growth equity firm, manages nearly $5 billion in institutional, tax-exempt assets, including $2.5 billion in mutual funds;
* Parametric Portfolio Associates, Seattle, has about $2.6 billion in total assets under management;
* NFJ Investment Group, a Dallas-based value equity firm, manages about $1.5 billion in institutional, tax-exempt assets.
No boutique changes
Mr. Treadway said PIMCO has no intention of changing anything with the three boutiques, noting the Columbus and Blairlogie deals were done at the request of each firm's principals. In fact, NFJ Managing Director Ben Fischer said his firm is "riding on PIMCO's coattails to the ball" by subadvising $815 million in retail mutual funds for PIMCO.
Two large subsidiaries manage the majority of PIMCO Advisors' $248 billion in total assets: Pacific Investment Management Co., Newport Beach, with more than $130 billion in U.S. institutional tax-exempt assets under management, predominantly active U.S. bond investments; and Oppenheimer Capital, New York, with more than $40 billion in U.S. institutional tax-exempt assets under management, predominantly active U.S. equity investments.
Pension fund executives said Columbus' continued strong performance and the fact that there was little staff turnover during the turmoil that followed the creation of PIMCO Equity gave plan sponsors confidence in the firm.
"The grass isn't usually greener unless there are some real problems," said Robert Maynard, chief investment officer of the $6.3 billion Public Employee Retirement System of Idaho, Boise.
Columbus manages $276 million in small-cap growth equity for Idaho.
"There's nothing to indicate that whatever went on changed the management team. They've had wonderful performance for a long period of time and continue to be outstanding," Mr. Maynard said.
That doesn't mean that the past six months haven't been diverting and difficult for Mr. Chiboucas, who manages the Idaho account. But performance didn't drop and Columbus leaders quickly sought a way out of the uncertain situation, Mr. Maynard said.