El-Erian to Step Down as PIMCO CEO

PIMCO announced on Tuesday afternoon that CEO and co-chief investment officer Mohamed El-Erian will be stepping down from those roles and departing PIMCO in mid-March 2014. Notably, El-Erian plans to stay on as a member of parent company Allianz's International Executive Committee and to advise that firm's Board of Management on global economic and policy issues.

The impact of El-Erian's departure isn't likely to be game-changing in the short term. He has served as a lead manager on two funds until now,  PIMCO Global Advantage Strategy Bond (PGSAX) and  PIMCO Global Multi-Asset (PGMAX), but they are comparatively small funds. And if history is a guide, PIMCO will quickly promote his current comanagers to lead roles and more than likely appoint additional managers to back them up. Meanwhile, El-Erian's operational responsibilities appear to be in good hands with the promotion of COO Douglas Hodge to the CEO position. That change returns the firm to a management structure similar to the one in place prior to El-Erian's assumption of CEO duties, a hallmark of which had been successful division of labor between the CEO and PIMCO's chief investment officer, Bill Gross.

The longer-term impact of this news is a bigger question mark. El-Erian has been a crucial, senior voice on PIMCO's investment committee and one of only a handful of people who have likely had the right mix of traits necessary to strongly challenge and help influence Gross' opinions. His loss is particularly significant given the retirement of Paul McCulley in December 2010. There are topnotch people already on and about to join the committee, but it remains to be seen whether they will be able to effectively play the devil's advocate role in that group, a role Gross has always professed to value highly.