FT: El-Erian's Departure Could Sap Investor Confidence in Pimco

Wednesday, 22 Jan 2014 01:11 PM

By Dan Weil

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Mohamed El-Erian's surprise decision to step down as CEO of fund giant Pimco Tuesday could cause investors to lose faith in the firm, experts say.

El-Erian and Co-Chief Investment Officer Bill Gross have served as the public faces of the firm.

Pimco's failure to offer a clear reason for El-Erian's move raises the risk of waning investor confidence in the firm, Jake Moeller, head of U.K. and Ireland research at fund data firm Lipper, tells the Financial Times.

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"Any high-level departure such as this is a considerable concern and would normally be assuaged by a clear statement," he notes. "However, this departure is more unsettling and amplified by it coming on the back of the huge outflows."

Pimco's flagship Total Return fund suffered an investment outflow of $41.1 billion last year, according to The Wall Street Journal. And the outflow was $30.4 billion for Pimco's U.S.-listed mutual funds, their first negative number since at least 1993.

"El-Erian was one of the few big beasts of the global asset management industry, and Pimco will feel his departure in the weeks and months ahead," Shiv Taneja, managing director at Cerulli Associates, a fund management research firm, tells the Times.

The CEO, who also is co-chief investment officer, had great influence on Pimco's investment committee, which oversees fund managers and their strategies, Eric Jacobson, senior fund analyst at Morningstar, tells The Journal.

El-Erian was "one of only a handful of people who likely have had the right mix of traits necessary to strongly challenge and help shape Gross's opinions," Jacobson adds.

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