Newspaper article International New York Times

Heir Apparent at Pimco Steps Down Unexpectedly ; El-Erian's Departure Follows Poor Year for Asset Management Firm

Newspaper article International New York Times

Heir Apparent at Pimco Steps Down Unexpectedly ; El-Erian's Departure Follows Poor Year for Asset Management Firm

Article excerpt

Mohamed A. El-Erian will leave the nearly $2 trillion asset management firm in March after a troubled year for the firm's bond funds.

The giant asset manager Pimco has lost its heir apparent and most prominent spokesman with the unexpected announcement that Mohamed A. El-Erian will be leaving the company.

His departure will probably reverberate throughout the global bond market, where Pimco, with nearly $2 trillion in assets, is one of the biggest participants. As co-chief investment officer and chief executive, Mr. El-Erian had a major role in its investment strategy, which influences the returns earned by the retirement accounts of millions of Americans.

Over the past year, however, its bond funds have struggled, reflecting rising interest rates and falling bond prices. Last year, investors in the firm's signature Total Return Fund, which was the largest mutual fund in the world, withdrew more than $40 billion.

Pimco said on Tuesday that it had "reorganized its leadership structure," leading to Mr. El-Erian's departure. The move was surprising because Mr. El-Erian, 55, has been the public face of Pimco since he rejoined the company in 2007, taking some of the spotlight from the company's founder and co-chief investment officer, William H. Gross.

In 2012, Mr. Gross said, "Mohamed is my heir apparent." On Tuesday, by contrast, Mr. Gross took to Twitter to announce: "I'm ready to go for another 40 years." That would take Mr. Gross to his 109th birthday.

A statement from the company said that Mr. El-Erian would leave Pimco in March but keep some leadership roles with Pimco's parent company, the German insurer Allianz.

Pimco also said that it was elevating two portfolio managers to become deputy chief investment officers under Mr. Gross. Douglas M. Hodge, the chief operating officer, has been named chief executive. A spokesman declined to comment beyond the statement.

Mr. El-Erian's resignation underscores the upheaval in the investment world as rising interest rates put an end to a bond bull market that lasted for decades and helped build industry giants like Pimco and BlackRock.

Todd Rosenbluth, a senior director for research and analytics with S&P Capital IQ, said that "2013 was a very tough year for Pimco" and that it could be difficult for co-chief investment officers to continue to work together after such a year. …

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