Layoffs hit Pimco, GMO as assets shrink amid flight from active management

The departures include top managers and the closure of some funds

Jun 17, 2016 @ 11:58 am

By John Waggoner

Layoffs have been scarce in the mutual fund industry, but they have hit two complexes recently: GMO and Pimco, which are suffering from declining assets as investors flee active management in favor of passive strategies.

Boston-based Grantham, Mayer & Otterloo has cut about 10% of its 650-person staff, according to Bloomberg. The layoffs include nine stock and bond analysts. The firm's assets have fallen about 20% in the past two years, to $99 billion, according to Morningstar.

In addition to the layoffs, several members of top management are leaving Jeremy Grantham's GMO. David Cowen, head of global equity, and Chris Fortson, head of fundamental research in global equity, will leave GMO at the end of the month.

Pacific Investment Management Co. is cutting its workforce and shutting down six funds with $260 million in assets. The Newport Beach, Calif.-based bond powerhouse will cut 68 jobs, or about 3% of the workforce, according to Bloomberg. Assets under management have fallen since the September 2014 departure of Bill Gross, who co-founded the firm in 1971 and built Pimco Total Return into the world's biggest mutual fund at its peak.

Among those let go include the entire dividend team, including Brad Kinkelaar, portfolio manager on the dividend strategy. Pimco will be exiting the dividend strategy for its funds and replacing it with its Research Affiliates equity income strategy. Pimco manages about $1.5 trillion.

The fund industry has seen enormous flight from more lucrative actively managed funds to passive index funds, squeezing profit margins. Actively managed U.S. stock flows saw an estimated net outflow of $18.7 billion in May, according to Morningstar, while passively managed funds saw a net inflow of $8.1 billion.

"I assume the coming years may experience a significant adjustment for smaller funds and many fund families — as costs continue to go up but growth and market gains are more elusive," says Avi Nachmany, senior advisor to Strategic Insight.

Adding to GMO's woes: Large-company value funds have seen a $29.8 billion outflow the past 12 months as the category has lagged large-company growth for more than five years.

0
Comments

What do you think?

View comments

Recommended for you

Featured video

Events

How are financial services reacting to 'Times Up?'

There is much left to be done to reach full equality, say Estee Jimerson of Envestnt, but things are improving.

Latest news & opinion

Morningstar evolving well beyond its origins analyzing mutual funds

Led by CEO Kunal Kapoor, firm is moving way past ratings — and financial advisers are paying close attention.

Focus Financial IPO could be a sell signal for RIAs

The $100 million stock offering will fine-tune RIA valuations.

Ex-Edward Jones broker sues former firm, alleging racial bias

Complaint alleges the firm's policies limit African-Americans' 'income and advancement opportunities'

Piwowar defends SEC's best-interest rule

SEC commissioner says the Department of Labor rule set up an 'unworkable, impossible set of standards for people to comply with.'

RIA in a Box acquired by private equity firm Aquiline Capital

New owners plan more growth for the software service provider.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print