Pacific Investment Management Co. (Pimco)

THE SCOOP


PIMCO-ed out to Allianz


California-based Pacific Investment Management Company (PIMCO) is an institutional money manager with more than $800 billion in assets under management.  PIMCO was established in 1971 as a subsidiary of Pacific Mutual Insurance Company (now known as Pacific Life) to sell separate management services for employee benefit plans, endowments and foundations.  At its inception, PIMCO had a mere $12 million in assets under management.  By 2000, that number had ballooned to more than $215 billion. 


In May 2007, German insurance giant Allianz AG purchased a majority stake in PIMCO's parent, PIMCO Advisors L.P., today known as Allianz Global Investors of America L.P., leaving Pacific Life with a minority interest of just 3 percent.  Although Allianz owns a 97 percent stake in PIMCO, it has little input in the day-to-day affairs of PIMCO, which still operates like a partnership.  At the end of 2007, PIMCO's client list included more than half of the 100 largest corporations in the U.S. As in previous years, PIMCO took home several awards and honors in 2007.  Derivatives Week named the firm Credit Investor of the Year, Foundation & Endowment Money Management called PMIC the Nonprofit Bond Manager of the Year and Pensions Management named it High Yield Bond Manager of the Year.


Covering all bases


PIMCO is divided into four main departments: portfolio management, account management, product management and business management.  Portfolio managers are responsible for market research, portfolio strategy and trade execution.  Account managers conduct client servicing, develop solutions for client investment needs and ensure investment portfolios meet clients' objectives.  The product management unit provides the link between portfolio management and account management, and is responsible for launching new investment vehicles and growing PIMCO's institutional business.  The business management group is responsible for setting the strategic vision of the firm.  PIMCO has more than 1,000 employees, including more than 335 investment professionals, who service approximately 870 institutional clients and over 5,400 mutual fund clients. Every sector of the bond market is included in PIMCO's investment universe, including governments, corporates, mortgages, asset backs, money market and hedged international.  Based in Newport Beach, Calif., the company also has offices in New York, Hong Kong, London, Munich, Singapore, Sydney, Tokyo and Toronto.


Bond king


As big as PIMCO has become, the company name is not nearly as recognized as that of company founder and chief investment officer Bill Gross.  As manager of the country's largest bond fund and anointed by Fortune as the "bond king," Gross is arguably the best-known bond expert in the world.  With a Warren Buffet-like status in the fixed-income world, Gross' commentsâ€"or even mere rumors of what he's buying or sellingâ€"can send stocks soaring or plummeting.  In July 2006, Motley Fool said Gross is "simply the best bond-fund manager in the business." And in May 2007, Investment Advisor Magazine called him one of the most influential people on Wall Street. Also in 2007, Gross and his PIMCO team were named Fixed-Income Manager of the Year by Morningstar for the third time in 10 years.  Why the hype?  According to Motley Fool, Gross, a former professional blackjack player, "knows how to make a gamble pay off."  More specifically, "Gross closely watches macroeconomic factors in his investing.  The literature for [PIMCO] Total Return calls it a 'top-down process,' whereby Gross and his team develop a three- to five-year outlook for the global economy and interest rates.  Everything is considered: currency movements, the yield curve, the credit markets, and so on.  It's a complex job, and Gross does it better than anyone else.  His approach is so good, in fact, that from 2002 through 2006, Total Return had beaten the Vanguard 500 Index 4.61 percent to 2.38 percent a year.

So where did Gross go wrong?


When the index wasn't performing well in 2006, investors stopped putting money into it.  Critics, like The Wall Street Journal, called into question Gross' ability to adapt to the changing bond market.  Admittedly, he was suddenly playing it safe, steering away from riskier bonds and focusing on short-term Treasurys and currency bets, among other things.


Unaccustomed to not being on topâ€"PIMCO's Total Return Fund is the largest bond mutual fund and has for years outpaced both the bond market and almost all of its competitorsâ€"the normally chilled out Gross (he practices yoga regularly) started feeling the stress.  According to the Journal, "With PIMCO's bets misfiring, Mr. Gross was so stressed that he left the office, taking an unplanned vacation, sitting at his home with his wife."  He told the paper, "I just had to leave for nine days, I couldn't turn on business television, I couldn't pick up the paper, it was just devastating … We've increased the volatility [of the portfolio] but I'm not enjoying it.  You can't sleep at night."  By mid-2007, though, it seemed that Gross had cleared his head and the gambler had jumped back into the game.  "Everybody is selling risky assets," he told Forbes in September.  "We've been out of the market.  Well, now we're back in."


Solid foundation


Many businesses try to give back to the community, but not all of them can say they have their own foundation to do so.  The PIMCO Foundation helps organizations in Orange County, Calif., to better the quality of life in the community.  The foundation offers grants to an organization annually, and it's very specific about whom it's trying to helpâ€"minorities, senior citizens and organizations that help the disabled or promote women's health take center stage here.  There's an interest in drug and alcohol prevention for school children and helping abused children as well. It's PIMCO's way of helping "people in need to lead more rewarding and responsible lives."

 

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Pacific Investment Management Co. (Pimco)


840 Newport Center Dr.
Suite 300
Newport Beach, CA 92660
Phone: (949) 720-6000
Fax: (949) 720-1376
www.pimco.com

STATS


  • Employer Type: Public
  • CEO: William S. Thompson Jr. & Mohamed El-Erian
  • 2007 Employees: 1,000

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