Too Early to Hit the PIMCO Panic Button

October 9, 2014 ( – Plan sponsors should not be upset by outflows from the Total Return Fund and the abrupt departure of Bill Gross, PIMCO’s lead portfolio manager, sources say.

By Jill Cornfield | October 09, 2014
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Ebola is a bigger threat to the market right now than Bill Gross, according to Robert C. Lawton, president of Lawton Retirement Plan Consultants LLC in Milwaukee.

First, Lawton tells PLANSPONSOR, the months of outflows from PIMCO in no way resemble a run on an individual bank, and the situation differs greatly from previous examples wherein the falling out of an investment manager and his employer caused significant disruptions in firm operations. Lawton cites the example of Jeffrey Gundlach abruptly leaving TCW, where he headed the firm’s Total Return Bond Fund, to establish another firm called Doubleline Capital. “A number of people followed Gundlach from TCW,” Lawton says, “and so far no one is following Bill Gross to Janus.”

Even though $23 billion flooded out of the fund during the last days of September, according to Lawton, there’s been no “mass exodus of funds” that he knows of. “I think most advisers would attribute the prior slow bleed to Mohamed El-Erian leaving, and Gross’s own erratic behavior,” Lawton says. In fact, he observes, it’s possible that PIMCO staff are “overjoyed at seeing Bill Gross leave.” Citing Gross’s several instances of bizarre behavior—the sunglasses worn at a conference, the public investor letter addressing his deceased pet cat—caused Lawton and many others to worry about his stability and what he was doing at PIMCO. “There was yelling and screaming and sending confrontational emails that were negative,” Lawton notes. “The fixed-income world is very conservative. Erratic behavior causes people to be nervous.”

Lawton also notes that Gross was listed as lead portfolio manager on 18 funds. “In order for him to do any of that work efficiently, there had to be had strong portfolio management teams in place on all of them,” he says, theorizing that it’s likely very little will change in the real management effort of those funds, even without Gross. “The actual management and day-to-day work done by Gross was probably pretty low.”