Insights

Posted on May 14, 2015

Debbie was quoted in The Wall Street Journal: Pimco Pulls Out of Stock Strategies

News

Pacific Investment Management Co. said it would exit from two of its equity strategies and say goodbye to its chief investment officer of global equities, the latest setback for the bond behemoth’s long-running effort to expand in the world of stock-fund investing.

Pimco said Virginie Maisonneuve, who joined the firm in January 2014 and has led the equities team from London, will depart next month of her own accord. There are no immediate plans to replace her, Pimco said.

Portfolio managers and analysts associated with the two Pimco equity strategies—called Pathfinder and Emerging Market Equity—also will leave the Newport Beach, Calif.-based firm. Several mutual funds are associated with each strategy, Pimco said. It isn’t clear how many employees will depart.

Ms. Maisonneuve’s departure and the closing of the funds come eight months after the acrimonious departure of Bill Gross, Pimco’s founder and former chief investment officer. Pimco, a unit of German insurer Allianz SE, also lost Chief Executive Mohamed El-Erian last year after clashes with Mr. Gross.

The moves announced Thursday underscore the difficulties the firm has had expanding into the stock business. Pimco executives have long had high hopes for equities and made a push into the business of actively managed stock funds in 2009.

The $50 billion that Pimco manages in stocks makes it a midsize player in the stock world, but it is tiny compared with the $1.6 trillion of overall assets managed by the firm. The funds being closed have assets of about $1.5 billion in stock mutual funds and separately managed accounts.

Internally, Pimco executives have long debated whether to emphasize stock investing and how to expand in that business. At times, senior executives publicly said their goal was to expand in the area. Behind the scenes, not everyone was convinced that stocks should be a focus for Pimco. The issue was a point of contention between Mr. Gross and his former colleagues in the year before his departure last September, according to people close to the matter.

Pimco Chief Executive Douglas Hodge said in a statement Thursday that “equities will continue to be an important part of Pimco’s investment solutions.” He said Ms. Maisonneuve will direct the transition and oversee an orderly liquidation of the strategies. Ms. Maisonneuve ran Pimco’s strategy of actively managed stocks.

Now, just $3 billion of the remaining stock funds will be actively managed funds. The rest are “enhanced equities” and “smart beta” funds, which try to beat the market by combining stock-index and active fixed-income investing.

Pimco’s shift away from part of its active strategy for stock funds comes as investors in recent years have moved more money into stock funds that attempt to track an index, amid disappointments over the returns of many actively managed stock funds.

Pimco began its latest push into stocks in 2009 when it hired Neel Kashkari, who had overseen the U.S. Treasury Department’s Troubled Asset Relief Program during the financial crisis, to help turn the bond-fund company into a player in stock funds. But the performance of funds Mr. Kashkari launched was spotty, and he left in 2013.

Ms. Maisonneuve was charged with expanding the business, which managed about $10 billion at the time. Upon her hiring, Mr. Hodge said her appointment represented a shift by Pimco. “We’ve been bond managers for 40 years, but we all recognize that because we serve a broader clientele, we have to evolve as well,” he said.

The largest fund being closed is the Pimco EqS Pathfinder Fund, which contained $885.9 million at the end of April. The Pimco EqS Emerging Markets Fund had $80.2 million, and the Pimco Emerging Multi-Asset Fund had $14.7 million.

The funds had seen outflows in recent years. The Pathfinder fund had nearly $2.9 billion in assets at the end of 2013, and the Emerging Markets fund had $600 million at the end of 2012.

Returns for all three funds have been in positive territory this year. The Pathfinder fund returned 9.3% as of Wednesday, the Multi-Asset fund returned 3.7%, and the Emerging Markets fund returned 4.7%, according to Morningstar figures.

Some financial advisers said they weren’t troubled by the fund closures or the departure of another high-ranking executive.

Pimco is “so much bigger than Mohamed, so much bigger than Bill,” said Debra Taylor, principal and founder at Taylor Financial Group in New Jersey, which oversees $140 million for clients and invests in Pimco funds. “If somebody is a Pimco believer, then this is not going to shake their belief or faith in Pimco.”

The departures and fund closings come as Pimco continues to struggle with investor outflows following the departure of Mr. Gross, who left for rival Janus Capital Group Inc. JNS -0.39 % after disagreements with colleagues and poor performance. Ms. Maisonneuve is the highest-profile departure from the firm since Mr. Gross left.

Pimco remains widely known as a bond-fund manager, operating one of the largest bond mutual funds in the world, the Pimco Total Return. But the fund recently lost the title of largest in the bond world to a Vanguard Group fund.

Write to Gregory Zuckerman at gregory.zuckerman@wsj.com, Kirsten Grind at kirsten.grind@wsj.com and Mike Cherney at mike.cherney@wsj.com

 

Share: