Pimco adds luster to firm, taps Bernanke as advisor
After the departure of its star bond manager last fall, Pimco went on a hiring spree.
Wednesday, it scored its highest-profile hire yet.
The Newport Beach bond investment giant said Ben S. Bernanke, the former chairman of the Federal Reserve, will become an advisor on macroeconomic and monetary policy issues, adding a globally famous name to its investment roster.
Bernanke’s move to Pacific Investment Management Co. is an implicit endorsement of the firm at a time when it is still grappling with the aftermath of the chaotic exit of co-founder Bill Gross in September. That jolt triggered more than $100 billion in investor withdrawals from its flagship fund.
Analysts and investors said the addition of Bernanke was an important marker in the firm’s efforts to stabilize the firm after the loss of Gross and, in January 2014, Mohamed El-Erian, the firm’s then chief executive and co-chief investment officer.
“They’ve lost a lot of their identity with Gross and El-Erian leaving, and I think this will help repair their image among institutions,” said David Schawel, portfolio manager at Square 1 Financial, a Durham, N.C., investment and commercial bank.
The hiring of Bernanke is the latest — and the most prominent — in a string of high-level appointments made under Douglas Hodge, who succeeded El-Erian, and Daniel Ivascyn, who succeeded Gross.
Since September, Pimco has brought in White House advisor Gene Sperling and economist Joachim Fels and has rehired Nobel laureate Michael Spence and well-regarded manager Marc Seidner, among others, to shore up its investment team.
Hodge said Wednesday that Bernanke first warmed to associating with the company while attending a Pimco investment forum in December and two more Pimco events in March. They then decided on a formal contract.
Hodge said Bernanke will attend future internal forums, including one coming up in May. Hodge said Bernanke also will be available for occasional discussions with the firm’s investment leadership and attend client events as his schedule permits.
“I am delighted to work together with Pimco’s strong team of investment professionals and contribute to its investment process in my role as an advisor to the firm,” Bernanke said.
Pimco is known for its macro-investment style, which bases investments on meticulously researched and endlessly debated forecasts for the global economy and monetary policy. And monetary policy has a direct effect on the price of bonds and other assets.
Its quarterly forums for its investment team are essentially large-scale internal debates on the direction of the world economy. Hodge said Bernanke’s career-long immersion in such topics made him a natural fit.
“The heart of what we do is trying to understand the macroeconomic events driving the cost of capital,” Hodge said. “This is what he does.”
Pimco declined to say how much Bernanke would be paid. It is the second consulting job Bernanke has taken since stepping down as Fed chairman in February 2014. Two weeks ago, the Chicago hedge fund Citadel said it had hired Bernanke as an advisor.
Jon Hale, director of manager research at research firm Morningstar Inc. in Chicago, said the hiring of Bernanke was important on a symbolic level.
“It does burnish their image externally,” he said. “It shows they’ve got connections to the highest-level policy makers.”
Whether the hiring convinces investors to move their money to Pimco is another matter.
“It’s a rounding error to our confidence level,” Mark Wilson, chief investment officer for Tarbox Group, a Newport Beach financial advisory firm that pulled its money from Pimco because of problems it saw before Gross left.
More impressive, Wilson said, was Pimco’s performance in managing to keep returns up during the outflows following Gross’ departure.
Square 1’s Schawel said the firm also faces stiff competition these days from the likes of DoubleLine Capital and TCW Inc., two Los Angeles bond firms, and Loomis, Sayles & Co. in Boston.
“Despite Pimco having a strong team, their flagship fund is no longer the industry standard,” Shawel said.
Twitter: @deanstarkman
