Giant money managers scrambling for billions flowing out of Pimco

The world of mutual funds may seem like a backwater on Wall Street, but the departure of bond trading superstar Bill Gross from Pacific Investment Management Co. has spilled blood into normally calm waters.

Competition in the mutual fund business has gone crazy this past week, as rivals go to war for a share of the money flowing out of Pimco’s nearly $2 trillion in funds.

A Google search for “Bill Gross” on Friday morning produced three paid ads atop the regular links -- for funds operated by BlackRock Inc., JPMorgan Chase & Co. and OppenheimerFunds Inc.

“Concerned about fixed income? Now is the time to rethink your bonds,” said BlackRock, the world’s biggest money manager.

“Rethinking your client’s bond strategy?” JPMorgan Asset Management asked.

“In the bond market, it’s no time for heroes,” said Los Angeles asset manager TCW Group Inc., displaying a photo of Tad Rivelle, its chief investment officer for bonds, and Laird Landmann, co-director of fixed income.

Those statements, on the front pages of the firms’ websites, were part of a barrage of come-ons to money management firms, who handle investments for everyday employees with 401(k) funds, high-net-worth individuals, enormous college endowments and a host of other clients.

“Everyone with a decent bond fund has come out of the woodwork with emails, calls and conference calls,” said Mark Wilson, chief investment manager at the Tarbox Group, a wealth management firm in Newport Beach.

Tarbox had begun liquidating its $25 million investment with Pimco well before Gross quit. Concerns of its clients had added to the firm’s own misgivings about Pimco’s management turmoil and recent less stellar results, said Tarbox President Laura Tarbox.

She said the firm had accelerated its withdrawals of funds from Pimco but had not finished the process when the news of Gross’ exit shook the financial world.

“We’d have looked smarter if we had completed it earlier,” Tarbox said.

Gross himself joined the rumble on Friday morning, when Janus Capital Group, his new employer, announced in an emailed invitation to prospective clients that the bond king and Janus Chief Executive Dick Weil would field questions on a conference call Thursday morning.

The call is to include an outlook on global markets from Gross and a discussion of the planned strategy at the Janus Global Unconstrained Bond Fund.

Gross will run the currently relatively tiny unconstrained fund – it had just $13 million in assets at last report – from a new office two blocks from Pimco’s headquarters, adjacent to Newport Beach’s tony Fashion Island mall.

Pimco has been reaching out, with its new top executives appearing on CNBC to repeat the sound bites, “We’re moving forward” and “Our clients are committed and they’re loyal.” Representatives further down the hierarchy have been at work as well.

A week ago Friday, the day Gross’ departure was announced, a Pimco representative called the Tarbox Group and made sure the investment team there saw Pimco’s news release assuring clients that its management team remained strong and stable.

In the week that followed, Pimco has “had several conference calls,” Wilson said. “They are doing a good job on this front.”

Two of the calls were about the Pimco flagship fund that Gross had personally managed – the Total Return Fund, which once approached $293 billion in assets but which has fallen to less than $200 billion.

About $23.5 billion was withdrawn from Total Return last month, Pimco has said, with the heaviest outflow the day Gross walked out and joined Denver-based Janus.

At least one additional Pimco conference call was about the firm’s Unconstrained Bond Fund, which will compete head-to-head with Gross’ fund at Janus.

The Pimco executive named to replace Gross as chief investment officer, Daniel Ivascyn, is one of three portfolio managers at the $18 billion unconstrained fund, which saw outflows of more than $3 billion in September.

In comments emailed to The Times, Wilson expressed surprise that Gross, who for years has been a fixture talking head on financial news networks, “is not on every media platform talking about his new venture.”

“This seems like a missed opportunity as (right or wrong) there will be dollars that flow out of Pimco to other solid firms,” Wilson said.

“Once placed, those dollars will probably not flow out of those firms even if Gross makes an amazing case for his new fund(s).”

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