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PIMCO Bets on Once Bright Stars

Aug. 16, 2015 - London, London, UK - London, UK. Former Prime Minister Gordon Brown gives a speech about the future of the Labour Party during 'Power For A Purpose' event hosted by Society of Labour Lawyers at Southbank Centre in London on Sunday, August 16, 2015. (Credit Image: Tolga Akmen/London News Pictures via ZUMA Wire)
Pimco's fund society.
  • Why it matters

    Why it matters

    PIMCO has had a torrid few months, after an acrimonious split with its founder Bill Gross. It hopes that its new high profile appointments will help convince customers to keep their money in its funds.

  • Facts

    Facts

    • PIMCO is bringing in several financial industry superstars to help rebuild the company’s image.
    • Former Fed Chairman Ben Bernanke heads the group of advisers.
    • Despite recent declines, the Allianz share price has increased by 20 percent since the beginning of the year.
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    Audio

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Allianz subsidiary PIMCO is resorting to outside help to bring it back on the winning track. Several stars from the financial sector are expected to get the asset management company from sunny California out of deep water.

PIMCO has reported a lot of bad news in recent months. High profile management squabbles and a set of bad investment decisions have taken its toll on the reputation of the world’s largest bond manager.

Situations like this are a nightmare for the Munich parent company, which avoids public mud fights and gossips more than most companies, and has always insisted that PIMCO is “a turnaround company.”

Now a team of five superstars from the financial industry is being brought in to regain the confidence of the financial world. They will form an advisory council of investment managers at PIMCO.

PIMCO hopes the new board will help repair the damage done by the acrimonious departure of founder Bill Gross.

The head of the new board is Ben Bernanke, the 61-year-old former chairman of the United States Federal Reserve who has worked for PIMCO since this spring. He will work with the former European Central Bank head Jean-Claude Trichet, former British Prime Minister Gordon Brown, the former top manager of Singapore sovereign wealth fund Ng Kok Song, and U.S. economist Anne-Marie Slaughter.

PIMCO hopes the new board will help repair the damage done by the acrimonious departure of founder Bill Gross. He sees himself as the victim of an intrigue by PIMCO managers, who were envious of his bonus. Mr. Gross is suing his former employer for at least $200 million.

Already before Bill Gross’ departurture, many investors had begun pulling money out of the bond manager, which struggled as yields on bonds hit record lows. The outflows accelerated after the founder left, but have stabilized more recently.

PIMCO chief investor Dan Ivascyn called his new advisory group “an incomparable team of macroeconomic experts and former decision-makers.”

Mr. Bernanke is seen as the godfather of monetary easing, having decided to keep the U.S. economy afloat with cheap money. Mr. Brown was Britain’s chancellor of the exchequer, or finance minister, during the financial crisis of 2008. His performance during that time is widely considered to be his finest hour. He later became prime minister after a bitter power struggle with his one time friend Tony Blair, but then lost the first general election he stood for as premier.

Mr. Trichet was only the second person to hold the post of ECB president in the young history of the institution, which watches over monetary policy for the 19-nation euro zone. He steered currency bloc through the initial phases of the financial crisis before being replaced by Mario Draghi. The Singapore Sovereign Wealth Fund is one of the most respected and ubiquitous wealth funds and has made a direct contribution to Singapore’s prosperity.

Will they be able to polish the now damaged image of the Allianz subsidiary? Investors on the Frankfurt stock exchange were reserved. Along with the rest of the DAX, the Allianz share price declined on Tuesday. But investors are likely to take that in stride. The Allianz share price has increased by 20 percent since the beginning of the year.

 

Frank Wiebe and Kerstin Leitel report for Handelsblatt from New York. To contact the authors: wiebe@handelsblatt.com and leitel@handelsblatt.com

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