PIMCO Stock Fund Manager Corba Steps Down

April 14, 2004 (PLANSPONSOR.com) - Kenneth Corba, the portfolio manager at Pacific Investment Management Co's (PIMCO) $845 million PEA Growth Fund and the $95 million PIMCO PEA Growth & Income Fund has resigned.

The resignation was a “personal decision” on the part of Corba, a PIMCO spokesman told the Wall Street Journal.   In addition to his portfolio manager duties, Corba also acted as chief investment officer for PEA Capital LLC, the unit responsible for a number of the PIMCO’s stock funds.   Corba had been with PIMCO since 1995.

Corba’s resignation follows civil charges filed in February by New Jersey regulators that PEA Capital,formerly known as PIMCO Equity Advisors, allowed improper trading arrangements to be conducted in its funds (See   PIMCO Hit with Garden State Trading Suit).  In theGarden State’s complaint, it is alleged that PEA had policies to police and stop market timing, but that PEA Capital funds were instructed to ignore the questionable trading activities of Canary Capital Partners LLC   – the hedge fund at the heart of the probe by New York Attorney General Eliot Spitzer that has touched off the tsunami of market timing and late trading allegations (See Spitzer Fund Abuse Probe Pumps Out More Subpoenas ).  

Those questionable trades included $100 million transactions conducted by Canary a maximum of four times a month in and out of three funds, including the PEA Growth Fund, New Jersey’s complaint said.   All of this was being done, New Jersey’s complaint continued, as Canary agreed to make a $25 million investment in another fund run by Corba .  Corba denied that PEA Capital was directly involved in the facilitation of these trades, claiming Canary obfuscated its trading activity to the firm.

New Jersey’s allegations, and Corba’s subsequent denial of involvement in the Canary scandal did not sit well with mutual fund rating firm Morningstar Inc.   In March, the firm recommended investors with holdings in mutual funds managed by PEA Capital consider divesting.  In particular, Morningstar was troubled by PEA’s claims that Canary pulled a fast one on the company. 

Rather, Morningstar said it believes Corba clearly put the interests of his company ahead of investors.   “Until the firm takes steps to dispel the doubts that this episode has cast over PEA’s commitment to shareholders, investors are better off taking their business elsewhere,” Morningstar said (See  Morningstar Cautions Investors on PEA Capital Funds ).