How Bill Gross became too hot for Pimco to handle

Fri Sep 26, 2014 6:17pm EDT
 
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By Paritosh Bansal and Jennifer Ablan

NEW YORK (Reuters) - Bill Gross' abrupt departure from Pimco, the giant bond firm that he co-founded more than four decades ago, was preceded by months of clashes between the star investor and the firm's executive committee that got progressively worse, according to sources familiar with the situation.

Tensions had been building within Pimco, the Newport Beach, California-based asset manager with about $2 trillion under management. Co-Chief Investment Officer Mohamed El-Erian, Gross's long-time heir-apparent, made an acrimonious exit in January. The flagship Total Return Fund, the world's largest bond fund, suffered 16 straight months of outflows. The wrangling and the underperformance grated on the executive committee, chaired by Chief Executive Douglas Hodge.

"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," Hodge said in a statement on Friday.

As Gross, known as the "Bond King" within the industry, butted heads with colleagues, the clashes got worse. In recent days, about five senior portfolio managers told the executive committee that they would quit if Gross stayed, the sources said.

Gross himself threatened repeatedly to quit, letting management know that he had been looking around for a role elsewhere. Jeffrey Gundlach of DoubleLine Capital, Gross' arch-rival and the closest contender for the Bond King crown, said in an interview on Friday that Gross approached him early last week about a possible role.

They met last week at Gundlach's house in Los Angeles. The two discussed the possibility of Gross joining DoubleLine, but Gundlach said he wasn't willing to share direction of the firm with Gross.

"He didn't seem that rattled. But he didn’t seem happy. He seemed a bit angry about what was going on," Gundlach said.

In recent days, when Gross again threatened to quit, the executive committee decided it was time he actually left the firm, one of the sources said.   Continued...

 
Bill Gross, co-founder and co-chief investment officer of Pacific Investment Management Company (PIMCO), gestures as he speaks at the Morningstar Investment Conference in Chicago, Illinois, June 19, 2014.  REUTERS/Jim Young