NEWPORT BEACH, Calif. -- William Cvengros might have dealt himself out of a job, but whether he stays or goes, the chief executive officer of PIMCO Advisors Holdings LP, dealt himself a rich hand.
About $8 million, to be precise, although that seems like peanuts compared with the $26 million William H. Gross, chief investment officer of Pacific Investment Management Co., Newport Beach, reportedly will bank when top brass sell off their 22% stake in the company many helped build into a money management powerhouse.
Allianz AG, Munich, Germany, will acquire a 70% interest in PIMCO Advisors Holdings of Newport Beach for $38.75 a unit, subject to unitholder and regulatory approval. Pacific Life Insurance Co., Newport Beach, will retain a 30% stake in PIMCO. The deal values PA Holdings around $4.7 billion overall.
While the rest of PIMCO's senior staff have been nailed down with five- to seven-year employment contracts and most of the 1,200 employees are receiving retention bonuses and other incentives to stay, Mr. Cvengros' job as CEO of the holding company will become largely redundant. As Mr. Cvengros noted, the broad, global overview of the newly affiliated investment management units will be handled from Munich. Mr. Cvengros said he is reviewing his options and said, when asked whether he hopes to remain at PIMCO, "I want to do what's best."
World's fifth largest manager
Oversight of the investment management units of the new Allianz certainly will move up a significant number of notches. The combined assets will total $659 billion, making the company the world's fifth largest money manager, according to the P&I/Watson Wyatt World 500 ranking of managers (Pensions & Investments, Aug. 9). Allianz manages $403 billion and had ranked 12th. PA Holdings manages $256 billion and ranked 29th, according to P&I/Watson Wyatt data.
Unlike many money management mergers, PIMCO is taking a very active role in helping its new parent company move into an arena where PIMCO has excelled -- institutional investment management. About 80% of the total assets of PA Holdings are institutional, said James Muzzy, a managing director at PIMCO; Allianz does not have a huge presence in the institutional market.
"PIMCO brings far greater expertise in institutional management to the deal. PIMCO parachutes in with instant knowledge in managing institutional assets and in the marketing and client service aspects of dealing with large, institutional clients," Mr. Muzzy said.
For example PIMCO, the fixed-income unit, will operate as a separate subsidiary under its own brand name in the United States and will assume oversight of about $100 billion in fixed-income assets managed by Allianz from Munich. PIMCO now manages $181 billion. Five senior PIMCO staff will relocate to Munich to integrate the fixed-income methodology of the two companies. Superstar bond manager Mr. Gross will remain PIMCO's chief investment officer under an employment contract that continues until 2006.
`Decisive step forward'
"For us, a joint future with PIMCO represents the decisive step forward in our strategy of establishing asset management as our third core business," Henning Schulte-Noelle, chief executive officer of Allianz AG, said in a statement.
Equity management, now handled by five investment units, will continue to be offered separately from Allianz under existing brand names. Aside from the PIMCO fixed-income unit, the other money management units of PA Holdings are PIMCO Advisors, Oppenheimer Capital, Cadence Capital Management, NFJ Investment Group and Parametric Portfolio Associates.
The mutual fund arm, PIMCO Funds, will continue to be offered in the U.S. Offshore clone funds of popular PIMCO funds, such as Mr. Gross' Total Return Fund and the Stocks Plus Fund, will be offered in Europe under the Allianz name.
Mr. Muzzy, who was one of PIMCO's founders, will retain his role as head of institutional marketing for non-U.S. clients. William Benz will continue to head client service for U.S. clients of PIMCO and Brent Harris will continue to head marketing for U.S. institutions.
William S. Thompson, will continue as CEO of PIMCO and will become president of Allianz Asset Management and Joachim Faber of Allianz will assume chairmanship of Allianz Asset Management. Kenneth M. Poovey, chief operating officer of PIMCO Advisors, will join Udo Frank as co-head of equities at AAM.
As for PIMCO's more than 1,600 institutional clients around the world, Mr. Muzzy said the impact of a merger with Allianz should be "cosmetic. Allianz has a history of leaving its acquisition targets alone to continue to operate their successful businesses."
Consultant Peter Starr of Cerulli Associates Inc., Boston, agreed. "I can't see that they'll (Allianz) make material changes that will affect existing U.S. clients. PIMCO has obviously been highly successful in the U.S. and offers some exportable competencies that Allianz can use globally. They aren't going to mess around with this," he said.