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By Jason Stipp and Eric Jacobson | 01-21-2014 04:00 PM

What to Watch as PIMCO's El-Erian Steps Down

Morningstar's Eric Jacobson discusses what should be on PIMCO investors' radars in the wake of news that Mohamed El-Erian is resigning as CEO and co-CIO.

Jason Stipp: I'm Jason Stipp for Morningstar. We got news Tuesday that Mohamed El-Erian has resigned as CEO and co-chief investment officer of PIMCO. Joining us today to give his first impression on the news is Morningstar's Eric Jacobson.

Eric, thanks for calling in.

Eric Jacobson: My pleasure, Jason.

Stipp: Eric, first of all, can you please detail the news that we received Tuesday about Mohamed El-Erian stepping down?

Jacobson: The announcement is that Mohamed El-Erian is stepping down, as you say, from his role as chief executive officer of PIMCO as well as his role of co-chief investment officer, a position he has shared up until now with Bill Gross. It's going to happen in Mid-March, and one of the key pieces of news here, I think, is that they announced at the same time that he's going to remain a member of the Allianz International Executive Committee, and Allianz, of course, is the parent company of PIMCO. In addition, part of the role is a plan for him to advise the board of management of Allianz on global economic and policy issues. So, that's a pretty big piece of information as well.

Stipp: Aside, obviously, from being CEO, he also did serve, as we mentioned, as the co-chief investment officer, which would suggest that he did have a hand at least in how a lot of the PIMCO offerings were managed or had influence over that. Can you explain, as you understand it, what role Mohamed El-Erian might have had in any PIMCO funds that I might have held or I do hold?

Jacobson: He was a named manager on just a couple of funds with relatively modest asset bases compared with what we see in other PIMCO portfolios. Those two would be PIMCO Global Advantage Strategy and PIMCO Global Multi-Asset.

However, as you suggest, being the co-chief investment officer, he's had a very large impact, I believe, particularly on the macroeconomic calls that have been implemented in probably almost every other PIMCO fund in existence. That's mainly, of course, through his role on the firm's investment committee, but that's a very big role, he's got a big voice, and he's been one of the most senior people involved.

Stipp: Eric, we do know that there have been a couple of missteps or stumbles as far as the calls, some of the bigger calls, that we've seen from PIMCO recently. Would you say that for investors who have these funds now that this is just one of the things that happens when you have active management, or do you think that there was potentially a real problem with some of the forecasts that they were making?

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