A consulting firm that advises public and private pension funds that collectively hold more than $40 billion in assets has counseled its clients to withdraw their money from PIMCO funds that had been managed by Bill Gross.
The next few days and weeks could be critical for the bond giant as it tries to stem a wave of money flowing out after the abrupt departure of its co-founder Friday. For years, Gross, 70, was the public face of PIMCO and one of Wall Street's most successful bond investors.
Pension consultants are now making recommendations, and investment managers at public and corporate pensions often take their cues from them on their mutual fund, hedge fund and private equity investments. Some on Wall Street are expecting that redemptions from PIMCO funds — not just ones once managed by Gross — could reach tens of billions of dollars.
The pension consulting firm Bogdahn Group said in a letter to one client that the firm is recommending that pensions "identify a replacement manager/strategy for mutual funds where Bill Gross was designated the lead portfolio manager."
Bogdahn also put dozens of other PIMCO funds on a so-called watch list, meaning the consultant advises pensions to closely monitor events at PIMCO, but not rush to bolt from other funds managed by the $2 trillion asset management firm.
"We are assessing the matter internally and communicating directly with our clients," said Mike Welker, Bogdahn's president and chief executive.
For now, many other pension consultants have chosen to put all of PIMCO's funds on similar watch lists. For instance, following the advice of NEPC, a large Boston-based pension consultant, investment offices for the state university retirement system in Illinois, as well as Ventura County and the city of Fresno in California, put PIMCO funds on watch lists.
Beth Spencer, a spokeswoman for Illinois' state university retirement body, which has $870 million invested with PIMCO, said that staff and consultants were still reviewing the management changes at the fund company.
To stanch the bleeding, PIMCO executives have mounted a public relations campaign, holding conference calls with large investors and brokerage firms, and going on cable business news channels to repeat the message that the firm remains in good hands, despite the departure of Gross.