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PIMCO Outflows Will Hurt Allianz

We’re placing PIMCO parent Allianz under review as we assess the impact of the a potential flood of outflows that could follow Bill Gross to Janus.

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In a surprise announcement, co-founder and chief investment officer Bill Gross announced that he is leaving PIMCO for  Janus Capital Group (JNS), effective Sept. 29. Bill Gross will manage the Janus Global Unconstrained Bond Fund and other related strategies starting in October. PIMCO was reportedly close to firing Gross before he resigned amid heightened internal tensions at the firm, particularly as the Securities Exchange Commission is investigating the $3.6 billion PIMCO Total Return ETF (BOND) for artificially boosting returns. 

We are placing no-moat  Allianz (AZSEY) under review while we assess the impact of the announcement. We expect to lower our fair value estimate, as it is likely that tens of billions, if not hundreds of billions in AUM, will follow Gross to Janus from Allianz. We believe Jeffrey Gundlach’s acrimonious departure from TCW in 2009 is a possible model, and we note that Gundlach’s DoubleLine now manages more than $50 billion. Allianz’s recent results were clearly weighed down by the weak performance at PIMCO, which saw EUR 17 billion of asset outflows in the second quarter compared with EUR 6 billion in the year-ago quarter, and we’d expect to see larger outflows going forward.

We are surprised by the announcement, given Bill Gross’ long tenure with PIMCO and Allianz CEO Michael Diekmann’s public support for Gross and PIMCO following the departure of Mohamed El-Erian in January (El-Erian has no plans to return). However, PIMCO’s announcement of Gross’ departure indicated that it was increasingly clear that there are fundamental differences between the firm’s leadership and Gross concerning PIMCO’s strategy going forward. Currently, PIMCO plans to rely on its recently established portfolio management committee of six investment officers, and will announce a new chief investment officer and fund manager for the PIMCO Total Return Fund shortly. CEO Douglas Hodge and president Jay Jacobs will continue to lead the company.

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Vincent Lui does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.