Many asset owner clients of Pacific Investment Management Co. cited their long-term relationship with the firm — ties that go beyond co-founder and Chief Investment Officer William H. Gross — as a reason for not terminating the firm after Mr. Gross' unexpected move last month to Janus Capital Group.
Most of the public, corporate and non-profit asset owners interviewed by Pensions & Investments are reviewing their PIMCO investments, possibly putting the firm on watch, but not making immediate changes.
Following is a recap of what many of them are doing, and why.
The Teachers' Retirement System of the State of Illinois, Springfield, has $3 billion with PIMCO in nine strategies — all fixed income, credit or global tactical asset allocation approaches — representing about 6.6% of total fund assets.
The fund put PIMCO on its watch list in February after former CEO and co-Chief Investment Officer Mohamed El-Erian left, but the system's staff has no plans to terminate the manager.
“(We) have enjoyed a relationship that over the years has broadened into one that has tapped into the many talented professionals and unique strategies at PIMCO,” said Richard W. Ingram, Illinois TRS' executive director, in an e-mailed statement.
Texas Municipal Retirement System, Austin, which has $23.4 billion in assets, has $2 billion with PIMCO in core-plus fixed income. The system put PIMCO on watch because of the departure of Mr. Gross, said spokesman Bill Wallace, in an e-mail. While Mr. Gross was not directly involved in the management of the pension fund's portfolio, “any departure of key personnel in a manager may be reflected in the watch status,” he wrote.
The New York City Retirement Systems, whose five pension funds have a combined $150 billion in assets, are reviewing the $7.08 billion total invested with PIMCO as of June 30, said Eric Sumberg, spokesman for Scott Stringer, New York City comptroller, who oversees the assets.
State of Michigan Department of Treasury, Bureau of Investments, Lansing, is not taking action now on the total $1.7 billion PIMCO manages for State of Michigan Retirement Systems' $60.2 billion defined benefit plan and $6.2 billion in combined 401(k) and 457 plan assets. Bureau staff are “monitoring the situation,” but “we are not currently planning changes,” said Jon M. Braeutigam, Bureau of Investments chief investment officer, in an e-mail. “We believe there is a 'deep bench,' if you will, at PIMCO.”
Minnesota State Board of Investment, St. Paul, has about $1.3 billion in exposure to PIMCO in a core-plus fixed-income separate account. Executives are “assessing the situation,” said Mansco Perry III, executive director. “We don't make knee-jerk decisions.” Mr. Perry declined to comment further. The board oversees $79.8 billion in assets, including $59.4 billion for state pension plans.
The $30.3 billion Indiana Public Retirement System, Indianapolis, continues to have PIMCO on watch for the $1.12 billion in assets it manages. “We will continue to carefully monitor any new developments,” said Jennifer Dunlap, INPRS spokeswoman. Indiana PRS had had PIMCO on watch since Jan. 31 because of Mr. El-Erian's departure.
North Dakota Retirement and Investment Office, Bismarck, has a total $460 million assets with PIMCO invested in four strategies. The North Dakota office will continue to monitor the recent management changes at PIMCO, David Hunter, executive director and chief investment officer, said in an e-mail. The Retirement and Investment Office oversees the $9.2 billion North Dakota State Investment Board, including $4.7 billion in pension assets.
St. Louis-based Emerson Electric Co.'s $4.8 billion 401(k) plan has about $160 million in the PIMCO Total Return Fund. “We have not made any decisions regarding the fund but obviously given the recent changes it is under evaluation,” said Doug Schoen, manager, pension investments at Emerson. “But we would not announce anything until we've completed our review … and we're in the midst of that.”
Dallas/Fort Worth International Airport's defined contribution plans offer the PIMCO Total Return Fund as an investment option. The three plans have a combined $4.2 million of their total $61 million invested with PIMCO. Michael Phemister, vice president of treasury management, said board members are having internal discussions about the strategy in light of Mr. Gross' departure but have not made any decisions to drop PIMCO at this time.
The University of Notre Dame, South Bend, Ind., which announced in July the PIMCO Global Bond Fund was being added as an investment option in its $1.06 billion 403(b) plan, effective Jan. 1, has not put the firm on watch, said Robert McQuade, university vice president for human resources. “We have not made any decisions concerning PIMCO,” he said. “Our investment committee will have our consultant (Hewitt EnnisKnupp) review PIMCO's status and that will include taking a look at their succession plan.”
The $7.3 billion New Hampshire Retirement System, Concord, “has been in the process of restructuring its fixed-income portfolio for the past year,” Marty Karlon, spokesman, said in a statement. “We have already made some changes and more are expected. The changes at PIMCO will be factored into future discussions regarding the fixed-income portfolio.”
The $28 billion Iowa Public Employees' Retirement System, Des Moines, “is evaluating several possible courses of action” regarding its $1.3 billion core-plus bond strategy, managed by PIMCO, said Karl Koch, IPERS' chief investment officer, in an e-mail. Mr. Koch said there were no further details to disclose at this stage.
Illinois State Universities Retirement System, Champaign, has $1.6 billion with PIMCO in four defined benefit plan portfolios and one defined contribution plan portfolio. “SURS and NEPC are currently reviewing the recent organizational changes at PIMCO and will be discussing with the board at the upcoming meeting,” Daniel L. Allen, SURS chief investment officer, said in an e-mail. NEPC Inc. is SURS' investment consultant. SURS oversees $17.2 billion in defined benefit assets and $1.5 billion in 401(a) defined contribution assets.
Hartford, Conn.-based Hartford Healthcare's 401(a), 403 and 457 plans, with combined assets of $600 million, offer the PIMCO Total Return Fund as an investment option. In all, the plans have $50 million in the fund. PIMCO had been under review “for some time,” going back to the departure of Mr. El-Erian, said David J. Holmgren, chief investment officer. Mr. Holmgren said he would not comment further.
The San Francisco City & County 457 deferred compensation plan's committee plans to meet Oct. 15 to hear a recommendation from its investment consultant, Angeles Investment Advisors, as to what to do with the $82 million invested in PIMCO Total Return Fund following Mr. Gross' move to Janus, said William Coaker Jr., chief investment officer, San Francisco City & County Employees' Retirement System, which oversees its $20.1 billion defined benefit plan and the $2.7 billion deferred compensation plan.
Jay Huish, the retirement system's executive director, said in an interview that if the recommendation was to terminate the fund, it would be the first time the plan has ever eliminated a fund from its offering.
The $90.1 billion North Carolina Retirement Systems, Raleigh, which manages fixed income internally, has some supplementary plan investments in PIMCO, but they are just monitoring the situation for now, said spokesman Schorr Johnson.