By Tom Lauricella, Julie Steinberg and Min Zeng

Mohamed El-Erian abruptly stepped down as chief executive of Pacific Investment Management Co., the giant asset-management firm that emerged as one of the winners of the global financial crisis but has recently been hit by waning investor taste for plain vanilla bonds.

Mr. El-Erian will leave in mid-March after seven years at the helm of Pimco, which manages $2 trillion as a unit of Germany's Allianz SE. He will remain on the German company's International Executive Committee and will advise on global economic and policy issues.

The company has announced that Douglas Hodge will succeed Mr. El-Erian as chief executive.

His departure leaves Bill Gross, who founded Pimco in 1971 and oversees the world's largest bond fund by assets under management, the Pimco Total Return Fund, as the sole public face of the company. Mr. Gross, Pimco's co-chief investment officer with Mr. El-Erian since 2007, will become chief investment officer, the company said.

"Mohamed has been a great leader, business builder and thought leader for Pimco and our clients," said Mr. Gross. "Together we have guided the firm and served our clients during a period of significant change in the global economy and financial markets."

With the departure of Mr. El-Erian, Pimco's management heads in a new direction. By elevating Mr. Hodge to the role of chief executive, the firm is putting an executive with experience in client relations and business in the top management role at the firm. That is a shift from Mr. El-Erian, whose background is in investment and economics, and who emerged during the financial crisis as one of the most oft-quoted experts on the state of the economy and financial markets.

"If there is any impact it will be on Pimco's visibility, though Gross has proven quite adept at being a very competent marketer of Pimco's image," said Adrian Miller, director of fixed income strategy at GMP Securities.

The move is the latest shift for Mr. El-Erian, who joined Pimco in 1999 as managing director and was a senior member of Pimco's portfolio management and investment strategy group. He left the firm at middecade to become chief executive and president of Harvard Management Co., which manages Harvard's endowment and related accounts, before returning to Pimco two years later.

"I have been extremely honored and fortunate to work alongside Bill Gross, who is one of the very best investors in the world," said Mr. El-Erian. "His talents are truly exceptional, as is his dedication. I have also been amazingly privileged to work with the most talented group of professionals in the investment management industry."

Pimco is also elevating a new generation of fund managers to upper management in naming Andrew Balls and Daniel Ivascyn as deputy chief investment officers.

Mr. Ivascyn, in particular, has had a rising profile at Pimco thanks to his chart-topping performance at the helm of the $30 billion Pimco Income Fund. Pimco Income is one of a growing number of "go-anywhere" bond funds that have been attracting investors looking for ways to play the bond market in a rising-rate environment.

In 2013, Mr. Ivascyn's fund took in $7.8 billion in new money from investors, having attracted $12.6 billion in 2012, according to Morningstar Inc. Mr. Ivascyn last week was named by Morningstar as its fixed-income portfolio manager of the year for 2013.

Pimco Income is up nearly 11% a year for the last three years, a pace that nearly doubled the average returns of its competitors.

London-based Mr. Balls, meanwhile, was often the public face for Pimco's views on the European debt crisis as head of the firm's European portfolio management.

Investors in Pimco Total Return Fund pulled out a net $41.1 billion in 2013, a mutual-fund industry record. The figure underscores the challenges confronting managers of traditional bond funds at a time when rising interest rates are prompting many investors to embrace "junk" bonds and stocks, which posted their biggest gains in more than a decade last year. When bond yields rise, their prices fall.

Write to Tom Lauricella at tom.lauricella@wsj.com, Julie Steinberg at julie.steinberg@wsj.com and Min Zeng at min.zeng@wsj.com

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