Bill Gross's exit could cost Pimco over $260 billion, bank says
Pimco (PIMCO) could suffer $266 billion in outflows as a result of star manager Bill Gross's exit from the company, according to an estimate from Deutsche Bank. Bill Gross announced last week that he is leaving Pimco for rival firm Janus.
Bill Gross, former co-founder and co-chief investment officer of Pacific Investment Management Company (PIMCO), speaks at the Morningstar Investment Conference in Chicago. Banks are estimating that Pimco's outlays as a result of Gross's departure could reach over $200 billion in the next two years.
Jim Young/Reuters/File
Estimates of how much investors are likely to pull from Pimco following the departure of star manager Bill Gross are swirling, with Deutsche Bank now expecting around 210 billion euro ($266 billion) in outflows or a fall in assets equivalent to 20 percent over the next two years.
The firm has named Daniel Ivascyn as chief investment officer and Gross's successor while Scott Mather, Mark Kiesel and Mihir Worah will take on Gross's flagship $221 billion Total Return fund after his shock exit on Friday.
Chief executive of Pimco Doug Hodge has said Gross's former fund "does not define Pimco," but analyst estimates of outflows are racking up.
Deutsche Bank research argued that each 100 billion euro in outflows is equivalent to around 9 percent of third party assets under management (AUM), which reduces Pimco's parent company Allianz's earnings by around 2 percent.
The bank also cut its price target on the insurer to 135 euro from 140, but maintained a hold position on the stock.
Bernstein Research expects asset outflows between 10 and 30 percent and sees a "good deal" of Pimco clients switching to Janus Capital Group – where Gross has taken up a post managing a recently launched unconstrained bond fund and similar strategies.
"We estimate that a drop in AUM of 10 percent would have a minor impact on Allianz fair value of 2 percent, while a 30 percent drop in AUM would hit the stock by around 13 percent according to our fundamental valuation mode," analysts led by Thomas Seidl said.
Credit Suisse has downgraded the group from "outperform" to "neutral", while a host of other brokers have cut Allianz's target price.
Morningstar has placed all of Pimco's rated funds under review including the Total Return fund, which despite sluggish performance this year remains the largest bond fund in the world.
"While it is not a shock to see Gross depart, it is a big surprise to see him leave so quickly and to a competitor," director of manager research for Morningstar, Russel Kinnel said.
Chief investment officer equity Europe at Allianz, Neil Dwane said Gross's longer term track record and his "brand value" means investors felt the "integrity of Pimco was very strong".
"His departure means they will recalibrate that, so the market's fears about outflows are simply a logical concern," he told CNBC.