In less than two months, PIMCO has experienced a dramatic fall from grace that removed the firm from the recommended list of some investment consultants and put it on the watchlist of some asset owners.
That reversal of fortune began shortly after the Jan. 21 resignation of Mohamed El-Erian, CEO and co-chief investment officer, the heir apparent to PIMCO founder and its acknowledged leader, William H. Gross.
Newport Beach, Calif.-based Pacific Investment Management Co. has been plagued by poor performance in its flagship Total Return Fund, managed by Mr. Gross, who shared the co-CIO title with Mr. El-Erian.
But outbursts attributed to Mr. Gross earlier this month have raised fresh concerns.
“I'm so sick of Mohamed trying to undermine me,” Mr. Gross was quoted as saying in a March 7 Reuters story, claiming Mr. El-Erian was behind an earlier story in The Wall Street Journal that described a tense, deteriorating relationship between the two men over investment performance issues in 2013. Mr. Gross also implied in the story that he had been monitoring Mr. El-Erian's phone calls.
“It's kind of shocking what is occurring,” an investment consultant said about Mr. Gross' comments.
The consultant — who spoke on condition of anonymity — is worried Mr. Gross is not fully concentrating on his investment responsibilities. “We would be hard-pressed to recommend PIMCO to a client seeking a fixed-income manager,” said the consultant, adding he would not recommend PIMCO as a finalist or even include the organization in searches for new managers.
Other consultants say they have PIMCO on watch and are monitoring events. But although some said they have reservations about recommending clients do business with the firm, they added that PIMCO would be considered in searches for strategies with strong investment performance.
But consultants say their clients are also concerned. With PIMCO under a media microscope, asset owners are concerned that doing business with the firm could bring unwanted attention, possibly creating headline risk and/or job risk for them.