‘Bond King’ Gross leaves Pimco for rival Janus

Bill Gross, who co-founded Pacific Investment Management Co more than four decades ago and rose to become manager of the world's biggest bond mutual fund, is leaving amid a dispute with management over how to move the firm forward and end record redemptions.

Mr Gross (70) and until today manager of the $222 billion Pimco Total Return fund, will join Janus Capital to oversee a new bond fund, according to a statement today from Janus.

Pimco was considering naming Daniel Ivascyn to succeed Gross as chief investment officer, according to a person familiar with the matter who asked not to be identified because the information is private.

“I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organisation,” Mr Gross said in the statement.

"I chose Janus as my next home because of my long standing relationship with and respect for CEO Dick Weil and my desire to get back to spending the bulk of my day managing client assets."

The departure of Mr Gross, a legend in bond investing, caps a tumultuous year for Pimco and marks the end of an era for the firm he helped create in 1971.

Pimco in January announced the biggest management reorganisation in its history after the abrupt resignation of former chief executive Mohamed El- Erian, who had clashed with Mr Gross over management of the firm.

Mr Gross’s main fund has shrunk from a peak of $293 billion last year as performance trailed rivals and investors turned away from traditional fixed-income strategies in anticipation of rising interest rates.

"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, Pimco's chief executive said in a separate statement.

Janus rose over 33 percent to $14.86 at 12:49 p.m. in New York, its largest intraday gain since September 2008.

Allianz, the German insurer that owns Pimco, declined 6.2 per cent in Frankfurt, the most in almost three years.

“Pimco has activated its succession plan and will announce a successor within the next several hours,” Allianz said in a statement.

Mr Gross knows Janus’s Mr Weil from Pimco, where Mr Weil worked from 1996 to 2010. He served as general counsel at Pimco and later became a manager director and chief operating officer. He was hired to run Janus in January 2010.

“It was not without great thought and deliberation over quite some time that I decided to begin this next chapter,” Mr Gross said in an e-mailed statement from Janus spokesman Steven Shapiro. “It is a time for me to reduce executive and people management responsibilities at a larger firm and focus on the pure aspects of portfolio management at a smaller one. Janus is the right fit at the right time in my career – and my life.”

Janus managed $178 billion in assets as of June. The company has struggled to stem defections even as it expanded the fixed-income team and created another to focus on multi-asset investing.

Mr El-Erian (56) widely viewed as the successor to MrGross, left in March after six years, leaving his dual roles of CEO and co- chief investment officer. He was the first Pimco manager to share the title of investment chief with Mr Gross.

Mr Gross’s move also comes as US regulators probe his Pimco Total Return ETF, a separate vehicle from the Pimco Total Return mutual fund.

The Securities and Exchange Commission is investigating whether Pimco bought many bonds at discounts then marked them up, a person familiar with the matter said this week.

Mr Gross, whose net worth is estimated at $2 billion, has more than $240 million of his own money in Pimco’s closed-end funds, according to data compiled by Bloomberg.

“Gross was a big supporter with his own personal purchases in them and coming out and making comments in the past about how they’re great investments,” Aaron Izenstark, chief investment officer and co-founder of Iron Financial. “That’s why it’s so shocking. It’s bringing the unknown into the situation.” – Bloomberg