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Finding Footing after the PIMCO Leadership Shakeup

Read about how PIMCO appears to have returned to solid ground after management change

Miriam Sjoblom, Morningstar Research Services LLC

Bill Gross’ departure from PIMCO in September 2014 was momentous. It prompted a tsunami of outflows, raising concerns that falling revenues would lead to painful cuts in resources and staff. Although Gross left behind an enormous investment team of talented managers and analysts, there were questions about how well the new PIMCO management structure, led by group CIO Dan Ivascyn, would jell and whether any frictions that arose from the realignment of roles would lead to turnover among PIMCO leadership.

Three years later, we believe a post-Gross PIMCO has found its footing. In our recent paper, we examine the changes the firm has undertaken as it has built upon—and moved beyond—its founder’s legacy. Today, the success of PIMCO’s strategies is less dependent on any one individual. This ascendant culture of teamwork, alongside a diversified (but still fixed-income-focused) business, leave the firm and its clients better off in our opinion.

Key takeaways from our analysis of PIMCO’s leadership and investment strategy

  • As outflows from PIMCO’s Total Return strategy have slowed, strong growth in its Income strategy and moderate growth for the firm’s global corporate-credit and alternatives businesses, have helped turned around its fortunes.
  • PIMCO’s business is more diversified and less dependent on one strategy than it was three years ago.
  • A shakeup in PIMCO’s executive leadership, including the hiring of CEO Manny Roman, doesn’t portend a significant course correction for the firm. But these changes are likely to further nudge the firm toward becoming a bigger alternatives-investing player.
  • PIMCO’s CIOs have stuck around, and the firm has shone a brighter spotlight on the contributions of up-and-coming internal talent. Although its overall investment ranks have modestly shrunk over the past three years, the firm has continued to attract experienced hires, with a bias toward economists and alternatives specialists.
  • The foundation of PIMCO’s investment process hasn’t changed, but the PIMCO leadership team, led by Ivascyn, has sought to bring more quantitative rigor to its decision-making and minimize the influence of behavioral biases.

PIMCO leadership focuses on the future

Such adjustments to the investment process are more evolution than revolution, though, which is consistent with how PIMCO has long operated. The investment team also has more work to do to demonstrate a competitive advantage in some areas—such as in its emerging-markets debt and unconstrained bond strategies.

Overall, we believe PIMCO’s resurgence is impressive. With the distraction of a leadership crisis and outflows behind it, the firm's investment team appears as focused as ever on delivering competitive results for investors in the years ahead. In 2017, we upgraded our PIMCO Parent rating to Positive from Neutral to reflect that assessment.

Read the full research paper “PIMCO Leaves the Past Behind.”
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