The departure of William H. Gross from Pacific Investment Management Co. might end up cutting deeper into his personal reputation than into the $1.87 trillion in assets under management at the firm he was synonymous with for 40 years.
Mr. Gross' “departure showed great disregard for clients and colleagues,” said Robert A. DiMeo, managing director of investment consultant DiMeo Schneider & Associates LLC, Chicago. “He's a brilliant man. He's part of a star system, but he didn't do it (investment management) alone. There are many bright and talented people at PIMCO for whom he really showed disregard in his abrupt departure.”
Two other consultants, who requested anonymity, said their concern about Mr. Gross' recent conduct would prevent them from recommending their clients invest with him at Janus.
“Despite his long-term track record as a brilliant investor, his recent behavior has been alarming,” said one consultant. “There was too much irrational behavior. I would need to see some stability (over the next 12 to 18 months) by Mr. Gross before I could recommend my clients invest with him.”
The second consultant called Mr. Gross “a very talented investor,” but said his firm would not recommend institutional clients give Mr. Gross money to manage. “His departure (from PIMCO) was pretty rough and sudden,” he said.
“We feel it's important to treat other people with respect, and running out the door of a firm in a flash is not something that's right. I don't see institutional money flowing his way.”
Mr. DiMeo said his firm is giving clients “a universal sell recommendation” to terminate PIMCO, and they are doing so. He didn't identify clients or amounts being shifted. But he did say his clients, particularly on the defined contribution side, had “over $1 billion” in PIMCO's Total Return Fund.
“PIMCO has plenty of capable people remaining at the firm,” Mr. DiMeo said. But “there are plenty of (other) attractive fixed-income (managers) that don't come with the drama (PIMCO) has.” He mentioned Dodge & Cox, San Francisco, and Baird Advisors, Milwaukee, as two examples.
To be sure, the drama Mr. DiMeo referred to is costing PIMCO some assets under management. Still, Pensions & Investments found just $29.4 billion of institutional assets in play among 35 PIMCO clients interviewed.
Other consultants said Mr. Gross' sudden move to Janus resolved a long-standing key-man risk at PIMCO, especially after the departure of former CEO and Co-Chief Investment Officer Mohamed El-Erian early this year.
In a memorandum to clients, Wurts & Associates Inc., a Seattle-based investment consulting firm, said PIMCO “continues on a tumultuous period of professional turnover,” pointing to the departure announced in January of Mr. El-Erian and Mr. Gross' departure, announced Sept. 26.
“The near-term impact on the Total Return Fund of potential redemptions may lead some investors to determine that their core exposure to fixed income should be derived from a product and a manager without the problems that PIMCO is currently experiencing,” the Wurts memo said.
Charles Van Vleet, assistant treasurer and CIO at Textron Inc., Providence, R.I., said Mr. Gross' departure “in some ways is very positive. It's been a terrible distraction to what I think is a broad and deep bench of professionals who have shown themselves to be exemplary at picking bonds.”
Textron, which has $132 million in PIMCO's Total Return Fund out of $10 billion in total retirement assets, has not noticed any unusual activity among participants, Mr. Van Vleet said.
Mr. Van Vleet cautioned against picking an asset manager based on its star staff: “If you're even in a fund because of a star, then you shouldn't be there.”