Pimco is losing its equity honcho

Jan 27, 2013 @ 12:01 am

By Jason Kephart

Pacific Investment Management Co. LLC has lost its head of global equities just as the investing tide appears to be turning back toward stocks.

Neel Kashkari, who joined Pimco in 2009 to launch the famed bond shop's equity division, said last week that he is leaving the company, possibly to pursue a career in politics.

He couldn't be reached for comment.

Mr. Kashkari oversaw the launch of Pimco's first four actively managed equity mutual funds, starting with the $2.2 billion Pimco EqS Pathfinder Fund (PATHX) in mid-2010.

He wasn't involved in the management of any of the funds, but he did hand-select the management teams. Mr. Kashkari also was the public face of the funds, making regular appearances on Bloomberg TV, CNBC and in other media.

INVESTMENT DOLLARS

His departure isn't likely to have much of an effect, if any, on the funds' managers, said Karin Anderson, a mutual fund analyst at Morningstar.

But capturing investment dollars could be another story.

“From the standpoint of his drumming up interest, that's another matter,” Ms. Anderson said.

Getting the attention of advisers is paramount now, as some think the long-awaited rotation from bonds to stocks may be under way.

Performancewise, the Pathfinder fund ranked in the bottom 10th percentile of all world stock funds over the past 12 months, according to Morningstar Inc.

In 2011's tough environment, the fund lost just 3%, while the average global equity fund lost 8%, according to Morningstar.

Its focus on managing downside protection led it to underperform last year. It gained 9%, while the category was up 14%.

The $600 million Pimco EqS Emerging Markets Fund (PEQAX) hasn't fared much better. Over the 12-month period, it ranked in the bottom quintile of emerging-markets funds.

The $367 million Pimco EqS Dividend Fund (PQDAX) has been the best of the bunch so far. It has ranked in the top half of world stock funds over the 12-month period.

The Pimco EqS Long/Short Fund (PMHAX), the last fund to be launched, will hit its one-year anniversary in April.

Stock mutual funds have enjoyed a virtual explosion of inflows over the past two weeks, gathering $23.6 billion in new money, according to the Investment Company Institute.

Last year, the funds suffered outflows of more than $85 billion.

"GREAT ROTATION'

Pimco doesn't report weekly flow data, so it is too soon to tell if it reaped some of that strong cash flow.

Spokesman Michael Reid declined to comment.

If the “great rotation” is really under way because of the relative attractiveness of stocks over bonds, Pimco has as much to lose as anyone.

The company had more inflows than any other fund company except The Vanguard Group Inc. last year, but $55 billion of the $59 billion it received went to its bond group.

Without Mr. Kashkari acting as the face of the equity funds, performance is going to have to do the talking, Ms. Anderson said.

“I think he's found some good people. Now it's a matter of waiting and seeing if they perform in the risk-minded way they were going for,” Ms. Anderson said.

Mr. Kashkari is no stranger to politics. During the financial crisis, he was tapped by then-Treasury Secretary Henry Paulson to head the $700 billion Troubled Asset Relief Program.

jkephart@investmentnews.com Twitter: @jasonkephart

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