Pimco’s chief executive Mohamed El-Erian, widely viewed as founder Bill Gross' heir apparent, has resigned after six years at the helm of the world’s biggest bond business.
Co-chief investment officer El-Erian – the first Pimco manager to share that title with Gross – will step down from the asset management giant in March. The 55-year-old will stay on the International Executive Committee of Pimco’s parent company, Germany insurer Allianz, and advise the board on ‘global economic and policy issues,’ Allianz said in a statement.
No reason was given for El-Erian’s departure, nor any clues about where he’s headed next. It'll leave a big hole in business news schedules, though: El-Erian regularly takes to our screens to expound his views.
Gross is staying on as chief investment officer, managing a whopping $2tn (£1.2tn), while chief operating officer Douglas Hodge is stepping up to the chief exec role. Money managers Daniel Ivascyn and Andrew Balls (brother of Labour shadow chancellor Ed Balls – potentially some awkward family conversations about executive pay there) are both being promoted to deputy investment chiefs.
It speaks for the strength and diversity of Pimco that all positions can be filled by internal candidates,’ said Allianz board member Jay Ralph. ‘With this continuity we are well prepared for the future.’
Continuity may not keep on generating returns for Pimco though. Under El-Erian, Pimco more than tripled its assets under management, as investors moved their money into fixed income after the financial crisis. However, the firm has struggled more recently as concerns about the US Federal Reserve raising interest rates - not to mention rumours of tapering - dampened appetite for bonds.
Moreover, it won't take much of a rates rise to send that $2tn of bonds spiralling downwards in value, so it looks like El-Erian is leaving while he's still on top. El-Erian also drove a move to diversify Pimco’s holdings into stocks, something Allianz chief exec Michael Diekmann said back in October was proving harder than expected.
Given that Gross is taking the whole of Pimco's investment portfolio back under his leadership after El-Erian's departure, there could be calls from its customers to break up the bond giant into more manageable chunks.
El-Erian first joined Pimco in 1999, having worked at the IMF for 15 years and served as its deputy director from 1995 to 1997. He left in 2006 to head up Harvard Management Company, which manages the university’s investments, but rejoined Pimco in 2007.
‘I have been extremely honoured and fortunate to work alongside Bill Gross, who is one of the very best investors in the world,’ El-Erian said in a statement.
Whatever El-Erian does next, it is likely to be big and clever. As well as teaching at Harvard Business School, the son of an Egyptian diplomat has a masters in economics from Cambridge and a PhD from Oxford. There was even speculation back in 2012 that El-Erian was being considered for Prime Minister of Egypt (although why anyone would want that job at the moment is beyond MT).
Gross made sure not to sound too concerned about El-Erian’s exit, tweeting, ‘PIMCO’s fully engaged. Batteries 110% charged. I’m ready to go for another 40 years!’ As he's already 69 years old, MT would be impressed.