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Pimco on defensive after report that Gross threatened to quit

Jul 15, 2014 @ 8:34 am

By Trevor Hunnicutt

PIMCO Bill Gross
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Pimco said late Monday it continues to stand by its beleaguered co-founder, William H. Gross, after a news article reported the legendary bond manager threatened to resign after clashing with executives.

The Wall Street Journal reported Monday night that Mr. Gross threatened to quit Pacific Investment Management Co. more than once after conflict with other top executives at the firm.

Some of the executives had warned the manager of the world's largest bond fund not to make divisive comments to the press after the departure earlier this year of former chief executive Mohamed A. El-Erian, according to the Journal, which cited “people familiar with the matter.”

The report was almost immediately slammed by Pimco. Mark Porterfield, a spokesman for the Newport Beach, Calif., fund house, wrote in an e-mail that the “article is full of untruths and mischaracterizations that are unworthy of a major news daily.”

Mr. Porterfield continued: “We stand by Bill Gross as Pimco's founder, chief investment officer and future investment leader.”

Pimco declined to comment further in response to a series of questions from InvestmentNews.

The Journal described a heated clash in June in which Mr. Gross challenged Douglas M. Hodge, the CEO, for not knowing more about the company's sales strategy and efforts to retain clients.

The report also said Mr. Gross was warned by a group of executives to “avoid inflammatory public comments” after an April appearance on Bloomberg TV in which he encouraged Mr. El-Erian to explain his departure.

Mr. El-Erian is, reportedly, contractually precluded from making such a public explanation.

The report compounded an onslaught of media attention that has followed Mr. El-Erian's unexpected departure, which reportedly followed clashes with Mr. Gross, as well as lagging recent performance of the firm's flagship Total Return Fund (PTTAX). Advisers and other investors have said those factors have contributed to their decisions to withdraw money from the firm.

The fund suffered its 14th consecutive month of outflows last month, to the tune of about $60 billion over the last year, bringing it to $225 billion in assets, according to research firm Morningstar Inc.

The Journal article also brought fresh attention to the manner of Mr. Gross, who has been described, in turn, as brilliant, reflective, mercurial and odd.

The star portfolio manager attracted attention after wearing sunglasses at an indoor conference held in Chicago last month by Morningstar.

At that event Mr. Gross said the new organizational structure at the firm — set up after Mr. El-Erian's departure — is working well and that he's “never been happier at work.” He also said the fund is not getting enough attention for what he has called the performance “turnaround” of Pimco Total Return.

One day later, according to the Journal, he told staff in New York that he wished he could “do it over again.”

“I wouldn't have worn the sunglasses,” he said, according to the newspaper.

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