Mohamed El-Erian resigns from Pimco, to stay on at Allianz

Tue Jan 21, 2014 9:01pm EST
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By Svea Herbst-Bayliss

BOSTON (Reuters) - Mohamed El-Erian, heir apparent to Pimco co-founder Bill Gross, will step down as chief executive and co-chief investment officer, raising questions about the future course of Pacific Investment Management Co, the world's largest bond fund manager.

Neither the company, which announced the changes on Tuesday, nor El-Erian gave a reason for the departure, which comes at a time when many investors are turning their backs on the kind of bond investments Pimco is famous for offering. Customers withdrew $41.1 billion of money from Pimco's flagship Total Return Fund last year, a record amount for the $2 trillion manager, according to investment research firm Morningstar.

El-Erian, 55, had increasingly been Pimco's public face, appearing regularly on cable television and at industry conferences. Bill Gross, 69, who built Pimco over the course of decades into the colossus it is today, said two years ago that when he retired he expected El-Erian to take over.

On Tuesday, Gross tweeted "PIMCO's fully engaged. Batteries 110 percent charged. I'm ready to go for another 40 years!"

The departure reverberated around the investment industry where Pimco plays an outsized role. Jeff Tjornehoj, senior research analyst at Lipper, said "Mohamed El-Erian helped set the strategic direction of the company and it certainly makes a difference when someone who is used to making such headlines leaves a company."

He added: "We don't know what kind of impact it will have yet but it will have an impact."

Douglas Hodge, chief operating officer, will step into the chief executive role when El-Erian leaves the firm in mid-March, Pimco said in a statement. Gross, who shared the title of co-chief investment officer, will become the sole CIO.

Andrew Balls and Daniel Ivascyn, long seen as rising stars at the firm, will be deputy chief investment officers, positioning them for a possible promotion to the CIO spot when Gross retires.   Continued...

Mohamed A. El-Erian, CEO and co-CIO of PIMCO, takes part in a panel discussion titled "Global Markets in Uncertain Times" at the Milken Institute Global Conference in Beverly Hills, California April 29, 2013. REUTERS/Fred Prouser