Bill Gross, one of the bond market's most renowned investors, is leaving Pimco, the investment firm he founded and with which his name has been effectively synonymous, for rival asset management firm Janus Capital Group, Janus said on Friday.
The surprise announcement, which rattled the U.S. Treasury market, comes just days after news broke that U.S. securities regulators were investigating Pimco and Gross in connection with an exchange-traded fund he managed at Pimco.
A source familiar with the matter told Reuters that Gross had been clashing with the firm's executive committee and had threatened to quit multiple times.
Dubbed the "Bond King" and long-time manager of the Pimco Total Return Fund, the world's largest bond fund, Gross will manage the Janus Global Unconstrained Bond Fund, Janus said in a statement. He begins work at Janus on Sept. 29, Janus said.
“While we are grateful for everything Bill contributed to building our firm and delivering value to PIMCO’s clients, over the course of this year it became increasingly clear that the firm’s leadership and Bill have fundamental differences about how to take PIMCO forward, ”Douglas Hodge, chief executive officer at Pimco, said in a statement.
Mr. Hodge continued: “As part of our responsibilities to our clients, employees and parent, PIMCO has been developing a succession plan for some time to ensure that the firm is well prepared to manage a seamless leadership transition in its Portfolio Management team. Earlier this year, the firm established a new portfolio management leadership structure that reflects our long-held belief that the best approach for PIMCO’s clients and our firm is to evolve our investment leadership structure to a team of seasoned, highly skilled investors overseeing all areas of PIMCO’s investment activities.”
Said Michael Diekmann, Chief Executive Officer of Allianz Group: “Since becoming part of the Allianz Group in 2000, PIMCO has grown enormously and contributed consistently to Allianz’s success. We join our PIMCO colleagues in recognizing Bill Gross for his work over the 43 years since PIMCO’s founding. The management and investment structure put in place in January as well as the thorough succession planning gives us complete confidence in PIMCO’s investment and executive leadership team.”
Mr. Hodge added: “We have built a deep bench of talent with extensive investment and leadership experience, including more than 240 portfolio managers globally, and our outstanding team around the world gives us the scale, talent, expertise and commitment to manage this transition. We will continue to add and promote talent at all levels to help us drive our firm forward. We are energized and fully focused on serving our clients today and into the future.”
German insurer Allianz SE, the parent of Newport Beach, California-based Pimco, was not immediately available for comment.
Pimco said in a statement that it had a succession plan in place and that its management board would confirm a new chief investment officer shortly.
Allianz shares sank more than 5 percent in Germany following the news, while Janus surged more than 30 percent in premarket trading in New York.
Bonds also took a hit. The 10-year U.S. Treasury yield , which moves in the opposite direction of its price, rose 4 basis points to 2.54 percent.
"Pimco and Bill Gross are synonymous," said Todd Rosenbluth, director of mutual fund research at S&P Capital IQ. "It will be extremely hard to think of Pimco and Bill Gross as separate, and it will take time for investors to realize that he no longer is going to play a role at one of the world's largest fixed income managers."
Gross, 70, who built Pimco into one of the world's largest asset managers with nearly $2 trillion, had come under renewed scrutiny as the U.S. Securities and Exchange Commission investigates whether a popular ETF he runs, which was launched to mimic the strategy of the much larger Pimco Total Return Fund, had artificially inflated returns. The probe was first reported by the Wall Street Journal.
Gross had already been under intense scrutiny after a public falling-out with former heir-apparent Mohamed El-Erian, who left Pimco earlier this year.
The management turmoil at Pimco was one catalyst behind persistent investor redemptions from the flagship Total Return Fund. In August the fund suffered its 16th straight month of outflows, and its performance lagged 73 percent of its peers.