By Gregory Zuckerman, Kirsten Grind and Mike Cherney
Pacific Investment Management Co. said it would exit from two of
its equity strategies and say goodbye to its chief investment
officer of global equities, the latest setback for the bond
behemoth's long-running effort to expand in the world of stock-fund
investing.
Pimco said Virginie Maisonneuve, who joined the firm in January
2014 and has led the equities team from London, will depart next
month of her own accord. There are no immediate plans to replace
her, Pimco said.
Portfolio managers and analysts associated with the two Pimco
equity strategies--called Pathfinder and Emerging Market
Equity--also will leave the Newport Beach, Calif.-based firm.
Several mutual funds are associated with each strategy, Pimco said.
It isn't clear how many employees will depart.
Ms. Maisonneuve's departure and the closing of the funds come
eight months after the acrimonious departure of Bill Gross, Pimco's
founder and former chief investment officer. Pimco, a unit of
German insurer Allianz SE, also lost Chief Executive Mohamed
El-Erian last year after clashes with Mr. Gross.
The moves announced Thursday underscore the difficulties the
firm has had expanding into the stock business. Pimco executives
have long had high hopes for equities and made a push into the
business of actively managed stock funds in 2009.
The $50 billion that Pimco manages in stocks makes it a midsize
player in the stock world, but it is tiny compared with the $1.6
trillion of overall assets managed by the firm. The funds being
closed have assets of about $1.5 billion in stock mutual funds and
separately managed accounts.
Internally, Pimco executives have long debated whether to
emphasize stock investing and how to expand in that business. At
times, senior executives publicly said their goal was to expand in
the area. Behind the scenes, not everyone was convinced that stocks
should be a focus for Pimco. The issue was a point of contention
between Mr. Gross and his former colleagues in the year before his
departure last September, according to people close to the
matter.
Pimco Chief Executive Douglas Hodge said in a statement Thursday
that "equities will continue to be an important part of Pimco's
investment solutions." He said Ms. Maisonneuve will direct the
transition and oversee an orderly liquidation of the strategies.
Ms. Maisonneuve ran Pimco's strategy of actively managed
stocks.
Now, just $3 billion of the remaining stock funds will be
actively managed funds. The rest are "enhanced equities" and "smart
beta" funds, which try to beat the market by combining stock-index
and active fixed-income investing.
Pimco's shift away from part of its active strategy for stock
funds comes as investors in recent years have moved more money into
stock funds that attempt to track an index, amid disappointments
over the returns of many actively managed stock funds.
Pimco began its latest push into stocks in 2009 when it hired
Neel Kashkari, who had overseen the U.S. Treasury Department's
Troubled Asset Relief Program during the financial crisis, to help
turn the bond-fund company into a player in stock funds. But the
performance of funds Mr. Kashkari launched was spotty, and he left
in 2013.
Ms. Maisonneuve was charged with expanding the business, which
managed about $10 billion at the time. Upon her hiring, Mr. Hodge
said her appointment represented a shift by Pimco. "We've been bond
managers for 40 years, but we all recognize that because we serve a
broader clientele, we have to evolve as well," he said.
The largest fund being closed is the Pimco EqS Pathfinder Fund,
which contained $885.9 million at the end of April. The Pimco EqS
Emerging Markets Fund had $80.2 million, and the Pimco Emerging
Multi-Asset Fund had $14.7 million.
The funds had seen outflows in recent years. The Pathfinder fund
had nearly $2.9 billion in assets at the end of 2013, and the
Emerging Markets fund had $600 million at the end of 2012.
Returns for all three funds have been in positive territory this
year. The Pathfinder fund returned 9.3% as of Wednesday, the
Multi-Asset fund returned 3.7%, and the Emerging Markets fund
returned 4.7%, according to Morningstar figures.
Some financial advisers said they weren't troubled by the fund
closures or the departure of another high-ranking executive.
Pimco is "so much bigger than Mohamed, so much bigger than
Bill," said Debra Taylor, principal and founder at Taylor Financial
Group in New Jersey, which oversees $140 million for clients and
invests in Pimco funds. "If somebody is a Pimco believer, then this
is not going to shake their belief or faith in Pimco."
The departures and fund closings come as Pimco continues to
struggle with investor outflows following the departure of Mr.
Gross, who left for rival Janus Capital Group Inc. after
disagreements with colleagues and poor performance. Ms. Maisonneuve
is the highest-profile departure from the firm since Mr. Gross
left.
Pimco remains widely known as a bond-fund manager, operating one
of the largest bond mutual funds in the world, the Pimco Total
Return. But the fund recently lost the title of largest in the bond
world to a Vanguard Group fund.
Write to Gregory Zuckerman at gregory.zuckerman@wsj.com, Kirsten
Grind at kirsten.grind@wsj.com and Mike Cherney at
mike.cherney@wsj.com
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