Vanguard, BlackRock may reap billions from Pimco after Gross exit
By Ross Kerber and Luciana Lopez
NEW YORK/BOSTON - Vanguard Group and BlackRock Inc could be prime destinations for hundreds of billions of dollars in assets that may flee Pimco in the wake of the sudden exit of Bill Gross, the celebrated "Bond King" of U.S. mutual funds. His new company, Janus Capital Group Inc, may see Gross's cachet attract tens of billions of dollars, investors and analysts said.
During the year ended Aug. 31, investors made $64.7 billion in net withdrawals from Pimco funds, according to research firm Morningstar Inc. Those outflows will likely accelerate with Gross's departure.
"Lots of Pimco AUM (assets under management) will be up for grabs," analysts at Wells Fargo Securities said, noting that they reckoned the total sum Gross managed at Pimco ranged from $500 billion to $700 billion. If half of that amount turns over - typical when a high profile manager leaves a fund - Gross' departure could translate into a $300 billion market opportunity for rivals, Wells Fargo analyst Christopher Harris said Monday in a research note.
BlackRock, the world's largest money manager, and Vanguard, the No. 1 U.S. mutual fund company, provide the performance and the size to attract cash flows from investors unnerved by the infighting at Pimco during the past several months and amid a probe by the U.S. Securities and Exchange Commission. Smaller fund companies may also benefit from the fallout.
Retail investors tend to shift money quicker than big pensions and other investment institutions, which deliberate more slowly about what to do.
Janus, the Denver asset manager with a volatile history, could be in for a surprise if it is expecting Pimco money to flow automatically after the star fund manager.
"Gross is a very capable investment manager. He's not God," said Carl Nelson, executive secretary and chief investment officer of the $1.1 billion San Luis Obispo County Pension Trust.
Instead, institutional investors such as Nelson, who can take months to make decisions, will want to see how Gross settles into his new role managing the Janus Global Unconstrained Bond Fund, which has about $13 million under management. Continued...