Pimco is one of the largest and most respected money manager companies around. Bill Gross and his fund, the Total Return Fund, were at the heart of the company’s reputation. During his tenure at managing the fund, Gross only had 3 losing years in 1994, 1999, and 2013, even then, the losses were relatively minimal. However, everything came to a halt September 26, 2014, when Gross abruptly announced that he was leaving Pimco to join Janus Capital. When Allianz, Europe’s largest insurer, purchased a 70% stake in Pimco for $3.3 billion back in 1999, it certainly looked like a great investment. Now, Allianz CEO Michael Diekmann is trying to calm investors and assure them that the investment principles still apply despite Gross’s departure.
Diekmann continues to worry about outflows at PIMCO
“I am watching outflows at Pimco on a daily basis,” says Diekmann. Pimco saw outflows of $268 billion in 2014, and saw 10% of its total assets taken out to $1.68 trillion. The Total Return Fund, specifically, had assets under management of $134.6 billion as of January 31st, down from the peak of $293 billion in April 2013. Allianz was forced to enact a 225 million Euro bonus program to help make sure Pimco did not lose any more top managers. In the end, Allianz paid out 24 million Euros specifically in the fourth quarter. Allianz is losing 3% today after disappointing fall in earnings, due to heavy costs and damage control from Gross’s exit. Analysts were forecasting net profits of 6.45 billion Euros, but the company reported net profit of 6.22 billion Euros.
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Allianz hopes majority of outflows are over
While outflows do remain, they have slowed in February, thanks to “Pimco’s solid performance” so far in 2015. Roughly, February outflows are in line with what the company saw in January. Additionally, Allianz is beginning to see some inflows of funds coming back into the money manager, adding optimism to its outlook. With the bull market continuing forward and a continued “easy money” policy by central banks, asset managers stand to continue benefitting. This will certainly stop the majority of the bleeding that Pimco and Allianz have seen over the past five months.
Overall, Bill Gross’s exit was a huge loss for Pimco and Allianz, not just financially but morally as well. However, five months later it appears that investors are finally beginning to accept the departure and slowly putting money back into the firm. Allianz struggled in the fourth quarter largely due to the Gross exit, but that is in the past and Diekmann surely is suggesting the worst is over.