Pimco tries to reassure antsy investors after honcho leaves

Pacific Investment Management Co., seeking to calm investors after the surprise departure of co-founder and former chief investment officer Bill Gross, said it plans no major changes in investment strategy.

Pimco initially was focused on trading after the announcement on Friday that Gross, widely considered the most influential bond manager, was leaving for Janus Capital Group, Pimco CEO Douglas Hodge said. The firm has since begun contacting clients and distribution partners worldwide in a bid to prevent large-scale redemptions.

“It’s business as usual,” said Scott Mather, one of three newly appointed managers of the $222 billion Pimco Total Return Fund, the world’s largest bond fund. “We’ve all been part of the team as members of the investment committee.”

The departure of Gross, 70, triggered a sell-off in the markets he favors — including U.S. Treasuries, credit-derivative indexes and the Mexican peso — before Pimco announced late that day that Daniel Ivascyn, 45, will replace Gross as chief investment officer. The firm, which manages almost $2 trillion in client assets, may see withdrawals of as much as 30 percent, according to a report by Sanford Bernstein.

Gross’s exit set into motion a succession protocol, put in place after the resignation in January of former CEO Mohamed El- Erian, Hodge said. The two had clashed over management issues and Gross’s leadership style, people familiar with the matter said at the time.

Pimco’s managing directors met and, “by basically overwhelmingly unanimous consent,” confirmed Ivascyn as group chief investment officer, Hodge said. Pimco named Mather, Mark Kiesel and Mihir Worah to take over Pimco Total Return.

Pimco’s leadership team convened a meeting of more than 300 employees who deal directly with clients, walking them through the process of appointing new management, said a person who was there.

After Ivascyn was introduced, the group cheered and gave him a standing ovation, said Hodge.

“It was just extraordinary, just this outpouring of optimism and enthusiasm from our group,” Hodge said.

Hodge, Mather and Ivascyn declined to comment on the reasons Gross left.

The main changes will be in style, Ivascyn said.

“We’re going to share responsibility a bit more than we have in the past,” he said. “A way to describe that is we’ll be using the word we a lot more than we have, hopefully, and hopefully we’ll emphasize team a little bit more.”

The firm needs to address both Gross’s exit and performance of the Pimco Total Return Fund, which is the largest fund held by 401(k)-type plans, said San Diego-based BrightScope Inc., which rates such plans.

Investors have pulled money from the fund for 16 consecutive months, Chicago-based researcher Morningstar said, as recent performance trailed rivals’ and investors turned away from traditional fixedincome strategies in anticipation of rising interest rates.

Gross unsuccessfully tried to halt redemptions and reassure clients, saying in May that Pimco funds would rank at the top again by year’s end.