Allianz Global Investors is a survivor amid the carnage of a broken economy, evaporating assets and disappearing jobs.
While other money managers reported losses in 2008 of one-third or more of assets under management and staff layoffs of 10% or more, Allianz Global's total AUM declined just 5.2% to €920 billion ($1.15 trillion) and its head count rose by 8.5%.
AGI subsidiary Pacific Investment Management Co., which accounts for nearly two-thirds of the money management holding company's assets under management — kept bringing in assets for AGI through 2008, ending the year at $747 billion, $1 billion ahead of year-end 2007. The Newport Beach, Calif.-based bond giant has insulated AGI from severe stock-market losses.
“PIMCO's stability has saved a bunch of people's bacon,” said an industry source who requested anonymity.
“PIMCO was an asset-gathering machine in 2008,” David Holmes, partner at Eager, Davis & Holmes LLC, Louisville, Ky., said in an e-mail response to questions. “According to our Tracker Hiring Analytics database, they ranked first in mandates won in U.S. core or core-plus fixed-income, first in distressed securities mandates, third in specialized fixed-income mandates and third in global fixed income.”
Stability hasn't only come from PIMCO. AGI also benefits from a strong parent in Allianz SE, Munich, which reported a €7.4 billion operating profit in 2008, AGI executives said. Not only is Allianz solid financially, but it also is a good parent because it gives its managers independence, according to sources.
“It's mostly because they regard asset management as a separate business,” said an investment consultant who requested anonymity. “By doing that, the culture is maintained.”
Stability of a parent is becoming more important in manager selections, Mr. Holmes noted. A survey of investment consultants his firm did in January showed 76% of respondents believed the “financial wherewithal/stability of the manager” would be a key factor when institutional investors choose managers.
But all is not rosy for Allianz Global. Returns among many of AGI's managers have been less than stellar, even at PIMCO. Last week, PIMCO announced delays in dividend payments for three closed-end bond funds on top of six others announced previously. The company has spent hundreds of millions of dollars buying back auction-rate preferred shares of the funds so that they can pay dividends.
According to data from AGI, performance among all AGI third-party investments has slid since at least 2006, when 91% of fixed-income and 70% of equity strategies outperformed their benchmarks. In 2008, those figures dropped to 48% and 62%, respectively. The figures are for the three-year performance for each period ended Dec. 31.
Other stumbles include U.S. large-cap value equity strategies at fellow Allianz subsidiaries Oppenheimer Capital LLC, New York, and NFJ Investment Group, Dallas. According to data from eVestment Alliance LLC, Marietta, Ga., one-year returns for the period ended Dec. 31 for Oppenheimer's and NFJ's large-cap value strategies were -51.2% and -40.3%, respectively, vs. a median -35.7%. Three-year annualized returns were -17.9% and -8.9%, respectively, vs. a median -7.3%.
In 2008, Oppenheimer's AUM fell 60.7% to $8.8 billion, while NFJ's AUM declined 32.3% to $26.4 billion.
Meanwhile, large-cap systematic strategies at San Diego-based AGI unit Nicholas-Applegate Capital Management, combining quantitative and fundamental analysis, also struggled in 2008, while systematic midcap and smidcap equity strategies outperformed 70% of other strategies in eVestment Alliance's respective universes.
“Performance is inevitably volatile in the current market environment,” Marna C. Whittington, chief operating officer for AGI and chief executive officer of Nicholas-Applegate, said in an interview. “The key is to determine your strategy, continually check your conviction and stick to your process. This has worked well for us and our clients in the past and we believe will do so in the future.”
Ms. Whittington stressed the importance of long-term returns. All Nicholas-Applegate strategies' gross five-year returns outperformed primary benchmarks as of Dec. 31, according to its website. The firm's AUM fell 43.6% to $7.9 billion.
Overall, AGI's 2008 operating profit fell 31.6% to €904 million, the result of €53 million in costs and shrinking revenue of €365 million, primarily because of lower performance fees and marking to market seed funds used to develop strategies. Net income fell 21.5% to €369 million.
Flows were roughly even for the year, with fixed-income inflows of €10.3 billion and equity outflows of €10.6 billion.