Gross heir apparent El-Erian quits as Pimco sees redemptions

Allianz Falls

“The fact that Allianz now appoints two deputy CIOs may indicate that Allianz sees a need to strengthen Pimco’s portfolio management decisions,” Sanford Bernstein analysts, including Thomas Seidl, wrote in a note to clients today. “We deem it unlikely that Mr. El-Erian will be a contender to replace Mr. Diekmann in 2015 as we understand he lacks experience in running a global insurance business and does not speak German. We would therefore not be surprised if he left the group in the not too distant future.”

Allianz fell 2% to 129.95 euros by 1:46 p.m. in German trading, valuing the company at 59.3 billion euros ($80.5 billion). The Bloomberg Europe Insurance Index, which tracks 24 companies, declined 0.6%.

El-Erian, the son of an Egyptian diplomat who’s fluent in English, French and Arabic, joined Pimco in 1999 as a senior member of the portfolio management and investment strategy group. He left in 2006 to serve as CEO of Harvard Management Co. and revamp the university’s endowment before rejoining Pimco in 2007. He also worked at the International Monetary Fund for 15 years, and served as the IMF’s deputy director from 1995 to 1997. El-Erian received a bachelor’s and master’s degree in economics from Cambridge University as well as a Ph.D. from Oxford University.

‘New Normal’

Along with Gross, he was responsible for coining the term “new normal” in 2009, which describes an era of lower returns, heightened government regulation, diminishing U.S. clout in the world economy and a bigger role for developing nations. He regularly writes commentaries for newspapers and websites on topics ranging from the global economy to education, and is a frequent guest on television channels such as CNBC, CNN and Bloomberg Television.

“I have been extremely honored and fortunate to work alongside Bill Gross, who is one of the very best investors in the world,” El-Erian said in a statement. He said in a 2010 interview that unlike Gross, who often acts on his “amazing instinct,” he himself is a worrier by nature and deliberates over every decision.

El-Erian did not respond to an e-mail and a phone call seeking comment.

“Pimco is huge and every consultant on the planet has a proportion of clients that will have some exposure to them,” said Ian Toner, director of strategic research at Seattle-based consultant Wurts & Associates, which advises institutional investors on more than $74 billion in assets at Pimco and elsewhere. “That makes this one of the biggest investment-management stories of the year.”

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