The unexpected announcement that PIMCO CEO and Co-Chief Investment Officer Mohamed El-Erian was resigning adds new problems for a firm already under stress.
Even before Mr. El-Erian's announcement on Jan. 21, financial analysts were concluding the days of rapid increases in assets and operating profits for Pacific Investment Management Co., one of the world's largest money managers, were gone.
“The enormous growth is over for PIMCO,” Daniel Bischof, an analyst with Helvea AG in Zurich, said in an interview, citing asset flows away from fixed income, the company's core strength. “No way can they keep up the growth.”
Investment consultants, analysts, pension executives and sources familiar with PIMCO's operations say the firm now has to deal with another major issue: who will succeed William Gross, the so-called “bond king,” if the 69-year old co-founder and CIO leaves.
Mr. Gross tweeted on the day Mr. El-Erian's departure was announced: “Batteries 110% charged. I'm ready to go for another 40 years.”
Mr. El-Erian, an economist with an impressive resume including stints at the International Monetary Fund and as CIO of Harvard Management Co., came to PIMCO, Newport Beach, Calif., for a second time in 2007 with the understanding he eventually would be Mr. Gross' successor.
The muted growth projections for PIMCO are a serious concern of executives at parent Allianz SE, Munich. PIMCO's 2013 estimated operating profit of $3.85 billion amounted to around 30% of Allianz's entire operating profit, Mr. Bischof said.