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 "Believe me when I say, we are a better team at this moment than we
were before," Gross, co-founder and co-chief investment officer at
Pimco, said in his monthly letter. "I/we take the future challenge
faced by all asset managers with close to a sacred trust." He
advised readers to "stick with PIMCO."
Pimco shocked the investment industry last month when it said that
El-Erian, chief executive and co-chief investment officer at the
Newport Beach, California-based firm, would leave in mid-March,
leaving Gross as the sole chief investment officer.
Last week, Pimco named Mark Kiesel, Virginie Maisonneuve, Scott
Mather and Mihir Worah, currently managing directors at Pimco, as
deputy chief investment officers. The four will join Dan Ivascyn and
Andrew Balls, who were appointed to the roles the previous week.
The shakeup comes as many investors are turning their backs on the
kind of bond funds Pimco is famous for offering.
The Pimco Total Return Fund, which has $237 billion in assets,
extended last year's record net outflows in January, with investors
pulling $3.5 billion from the fund over the month, Morningstar data
showed on Tuesday.
"The evidence is very anecdotal, but there also appear to be at
least some investors who are viewing Pimco's latest shakeup —
including El-Erian's departure and the many other promotions,
hirings, and departures that were just announced — as a major
concern," Morningstar senior research analyst Eric Jacobson said.
"At least some portion of the January flows are likely a result of
these folks trimming their holdings in Total Return."
Gross's letters provide a glimpse into how influential bond investor
Pimco's assets, which measured $1.92 trillion in as of December 31
according to the firm's website, will be managed.
While Gross commented on Pimco's future without El-Erian, he
dedicated much of his letter to the state of the U.S. economy,
noting that the lower U.S. government deficit is slowing credit
growth, which could hurt economic growth and risk assets.
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Slower credit growth, Gross said, is negative for the economy in the
near term since credit growth is critical to support prices of
riskier assets.
"Our PIMCO word of the month is to be 'careful,'" Gross said. "High
quality bonds will continue to be well bid and risk assets may lose
some luster."
Gross said that 3-4 percent credit growth in the United States may
not be enough to support 3 percent economic growth, especially if
asset prices decline.
Gross also said that the Federal Reserve's reduction in its monthly
purchases of Treasuries and agency mortgages will contribute to the
slowdown in credit growth.
The U.S. central bank announced a further $10 billion cut to its
monthly bond buying last month. The Fed has implemented the
bond-buying program in an effort to stimulate U.S. economic growth
and lower long-term borrowing costs.
Despite the latest outflows from Gross's fund, investment gains in
January left the fund's total assets roughly unchanged. The fund
posted a total return of 1.35 percent last month after Treasuries
prices rallied on some weak U.S. economic data and a rout in
emerging market assets.
Pacific Investment Management Co. is a unit of European financial
services company Allianz SE.
(Reporting by Sam Forgione; editing by
Meredith Mazzilli)
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