In a move that no one saw coming, Mohamed El-Erian, Bill Gross’ heir apparent at PIMCO and the face of the company, abruptly announced his resignation Jan. 21 in the wake of tough times for the giant bond fund manager. PIMCO saw net redemptions for the first time ever in 2013, spurred by withdrawals of $40 billion from its Total Return Fund.
Some speculated that PIMCO’s lack of success in the equity markets may have led to El-Erian’s sudden departure. In fact, all three funds overseen by El-Erian lost money, with the largest trailing 50% of its peers. Neel Kashkari, hired in 2009 to build PIMCO’s equity business after achieving TARP fame at Treasury, departed last year after launching six funds that attracted just $10 billion. Meanwhile, PIMCO is lagging Vanguard and BlackRock (subscription required) in the ETF market and has yet to break out with their TDFs.
El-Erian has no immediate plans, although he will stay with the firm until March. COO Douglas Hodge, who has more of an operational background, will replace him as CEO. Co-CIOs also were named, one of whom, Daniel Ivascyn, leads PIMCO’s successful unconstrained bond fund. That fund attracted more than $20 billion in the last two years.
Gross, who had pronounced El-Erian his heir apparent in 2012, tweeted on Tuesday that he plans to work for 40 more years — which would take him to 109. Maybe yoga really does work!