PIMCO already losing billions following Bill Gross’s abrupt departure

Following Bill Gross’s abrupt departure from the bond firm he founded, Pacific Investment Management Co., has suffered more than $10 billion of withdrawals.

According to people familiar with the matter, there were months of disagreement between Bill Gross and the firm’s executive committee. Bill Gross left to join the mutual fund management firm Janus Capital.

Doug Hodge, Pimco CEO, said on Sunday that Pimco is going to be shifting from the founder-led model, adding that Bill Gross “does not define Pimco.”

Hoedge said:

“Recognize that we are a $2 trillion asset manager but over the last five years, we have expanded to far more parts of the fixed income and into other asset classes and other geographies, so the Pimco Total Return Fund does not define Pimco. It’s an important flagship product of this firm but it is not our only strategy.”

Pimco can expect to see more outflows following Bill Gross’s announcement, however, others have said that they remain committed at the firm.

Hodge and Dan Ivascyn, replacing Gross and now CEO of the company, told Reuters that they have been in touch with clients over the weekend about the firm’s new leadership structure.

Hodge said:

“With regard to our clients and the potential for outflows, again, when there is any significant change, we are out communicating with our clients and we are talking with them and we are explaining the changes that are going on.”

“The outflows that have happened – and that may happen – we stand by our clients. We are managing assets and are confident that the vast majority of clients will stand with us.”

Morgan Stanley’s wealth-management arm is going to be in talks with Pimco executives on Monday to find out how the firm will handle Gross’s departure. Despite Morgan Stanley making no formal action to limit Pimco funds in clients’ portfolios, there are brokers who have recently been selling, according to the WSJ.

Gary Pollack, the head of fixed-income trading in New York at Deutsche Bank AG, who is in charge of over $12 billion, said:

“There is a good chance that Pimco will lose its dominant position as a fixed-income manager as assets find their way into other investment managers, thereby leveling the playing field in fixed income.”