Bond king, Pimco reach $81-million settlement

BITTER LEGAL FEUD

JOHN GITTELSOHN For Bill Gross, the long goodbye is finally over.

More than two years after the legendary bond manager was ousted from Pacific Investment Management Co. — the firm he co-founded and built into a US$2-trillion asset manager — he settled a bitter legal dispute with a public rapprochement.

Pimco, where Gross shot to fame as the king of the bond market, agreed to pay US$81 million — a modest sum given the fortune he amassed during his 43 years there. Pimco also agreed to dedicate a new “Founders Room” at its headquarters in honour of Gross and others who launched the firm in 1971, a nod to his role as its most famous market prognosticator and manager of the Pimco Total Return Fund, once the world’s largest mutual fund. Pimco also named him as a director emeritus of the firm’s charitable foundation.

Gross will partially match the US$81 million settlement to make a total charitable contribution of US$100 million, according to a person with knowledge of the matter, who asked not to be identified because the financial terms weren’t disclosed. The proceeds are going to the billionaire’s family philanthropy, the William and Sue Gross Family Foundation, the person said.

“Pimco has always been family to me, and, like any family, sometimes there are disagreements,” Gross said in a statement, which added that he is glad “to know that Pimco is in capable hands.”

For Gross, now 72, the development brings an end to a long struggle in the twilight of his career to overcome his split with the firm he cofounded and turn the page at Janus. Pimco faced a torrent of redemptions after Gross’s exit in 2014, but that money didn’t follow him en masse to his new home.

For Pimco, the resolution offers the firm, which managed US$1.5 trillion as of Dec. 31, a chance to move on from Gross’s legacy, according to William Thompson, Pimco’s CEO from 1993 through 2008. “It’s a new day,” Thompson, who remains friendly with Gross and associates at Pimco, said in a telephone interview. “You’ve got to look forward. If you don’t spend most of your time focused on today and tomorrow, then you’re probably not doing the right thing for your investors.”

Gross sued Newport Beach, Calif.-based Pimco, contending he was ousted by a “cabal” of executives who wanted a larger share of his bonus, which was US$290 million in 2013. He also asserted in the suit that the executives wanted to offer more high-fee products to investors rather than Pimco’s traditional bond funds. Gross, who didn’t reply to a request for comment, now runs the US$1.9-billion Janus Global Unconstrained Bond Fund.

After his departure, Gross set up a Janus office at a tower with a view of Pimco’s headquarters. His unconstrained fund has had a total return of 5.1 per cent since he took over in October, 2014, according to Bloomberg. That compares with a six-percent return during the period for the US$3.5-billion Pimco Unconstrained Bond Fund, which uses a similar go-anywhere strategy.