William H. Gross appears to have jumped before he could be pushed out at Pimco, the world’s largest bond firm, which he founded and helped build from scratch.
Gross, known as “the bond king,” said Friday he was quitting his post as chief investment officer and joining Janus Capital. His announcement came after weeks of behind-the-scenes discussions to replace him and reports he was about to be dismissed.
A person briefed on the matter — but not authorized to discuss the matter publicly — said Gross, 70, had been threatening to resign for a few months.
Despite Gross’ conflicts at Pimco, investors were happy to hear he was coming to Janus. That fund group’s shares surged 43 percent, the most in 14 years, closing Friday at $15.89, up $4.78.
Gross’ troubles at Pimco included a Securities and Exchange Commission inquiry into whether a $3.6 billion exchange traded fund actively managed by Gross inflated its performance numbers.
His management style, including occasional outbursts, has been criticized. And his recent behavior — showing up at a mutual fund industry forum to give an address wearing sunglasses and writing a monthly investor letter that was essentially an ode to his dead cat — also has drawn scrutiny.
At Pimco — the Pacific Investment Management Co. — Gross’ $222 billion Total Return Fund is one of the world’s largest bond mutual funds. It has drawn some criticism for its reliance on derivatives to get exposure to bonds. But over the past 10 years, the Total Return Fund has returned 6 percent versus the comparable 1.40 percent gain in the Barclays U.S. Aggregate Bond Index over the same time period. The decade-long performance of the Total Return Fund puts the portfolio in the top 5 percent in its category, according to Morningstar.
Pimco later Friday named Daniel Ivascyn group chief investment officer of the $1.97 trillion bond firm. Mark Kiesel, Scott Mather and Mihir Worah will take over management of the Total Return Fund.
Pimco in January named Ivascyn as one of its six deputy chief investment officers, reporting to Gross, in a management reorganization following the departure of former chief executive officer Mohamed El-Erian. Ivascyn, who runs the $38 billion Pimco Income Fund, has beaten 99 percent of his peers over the past three and five years, according to data compiled by Bloomberg. Morningstar Inc. in January named Ivascyn and the co-manager of the fund, Alfred T. Murata, fixed income managers of the year for 2013.
A spokeswoman for Allianz, Pimco’s parent company, said the decision to leave the firm was made by Gross.
Pimco subsequently issued a statement from Douglas Hodge, the firm’s chief executive, that said the firm’s succession plan was in place:
“While we are grateful for everything Bill contributed to building our firm and delivering value to Pimco’s clients, over the course of this year it became increasingly clear that the firm’s leadership and Bill have fundamental differences about how to take Pimco forward.”
At Janus, Gross will manage a recently started Janus Global Unconstrained Bond Fund and related strategies and will join Myron Scholes and other members of the Janus team focused on global asset allocation. He will be based in a new Janus office to be established in Newport Beach, Calif. Janus is based in Denver.
In a statement, Gross said: “I look forward to returning my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complicated organization. I chose Janus as my next home because of my longstanding relationship with and respect for CEO Dick Weil and my desire to get back to spending the bulk of my day managing client assets.”