Backstabbing, betrayal, cheesecake (yes, really): the $200m (£130m) lawsuit filed by ‘Bond King’ Bill Gross against the company he founded reads less like legalese and more like the plot of a high society thriller.
Gross is suing for wrongful dismissal and breach of contract, accusing former underlings of being ‘driven by a lust for power, greed, and a desire to improve their own financial position and reputation at the expense of investors and decency.’
The once-feted investment manager left Pimco under a cloud in September to join far smaller rival Janus Capital. His heir apparent Mohammed El-Erian had quit in January, after which reports emerged of public shouting matches between the two (Gross then allegedly accused his former protégé of writing a Wall Street Journal article himself).
Now Gross has given his own lurid account of his exit from the asset management firm he co-founded in 1971, that at one point in 2013 managed a staggering $2tn worth of assets.
‘A cabal of… managing directors plotted to drive founder Bill Gross out of Pimco in order to take, without compensation, Gross's percentage ownership in the profitability of PIMCO. Their improper, dishonest, and unethical behavior must now be exposed,’ the court filing reads.
It explains that Gross got a 20% share of the ‘profit sharing bonus pool’, meaning he reaped a staggering $300m in 2013. To be put that in perspective, Goldman Sachs splits around $13bn between 34,000 staff. But Gross is apparently no greedy capitalist – he’s said he’ll donate the $200m he says he is due for 2014 to charity.
The investor, known as the ‘Bond King’ at the height of his powers in 2013, claims that his problems started when El-Erian tried to move Pimco’s focus from the bonds he favoured towards riskier assets. El-Erian’s strategy was like ‘the extensive and varied menu at a Cheescake Factory restaurant. Gross, on the other hand, went for the ‘simple, laser focus’ of ‘bonds and burgers’.
The complaint then alleges that Pimco investigated the leaks of the bust-ups between Gross and El-Erian that appeared in the FT and WSJ and found that Andrew Balls (brother of former shadow chancellor Ed), who had been promoted to co-deputy chief investment officer when El-Erian left, was Deep Throat.
Allianz, the German insurer that owns Pimco, was not impressed. A spokeswoman told MT they ‘learnt about the complaint via press reports,’ but wouldn’t comment on the allegations other than to say they had ‘no merit’. She did, however, say that Gross left for Janus of his own accord rather than being fired, something it apparently also first found out from the media.
When Gross left, billions of dollars had already poured out of Pimco as many investors shifted their money out of bonds into equities as western economies recovered. Although its assets under management are now a mere $1.1tn, the Total Return bond fund Gross made his name managing made investors a 1.5% return in the year after he left.
On the other hand, any investors who followed him to Janus, where he manages just $1.4bn, got themselves a 2.5% loss. Anyone would think he’s trying to direct people’s attention elsewhere.