Okay. Full transparency time. For a time in my naive life at business school, I thought that I wanted to go into investment management. The investment management industry is a hard industry to get into-- its an increasingly shrinking and consolidating industry (the pie is getting smaller, but there's more people that want a piece), it's filled with ridiculously intelligent people, it will only fill its ranks with what it believes are the smartest people and having a long-lived career in this industry is possible, but it takes a very specific type of person.
Specifically within fixed-income funds (or funds that are known to do fixed-income, as most firms now argue that they offer a variety of products) the game is getting harder because rising rates make people move away from bonds because the returns aren't as good. One of the biggest fixed income funds out there is PIMCO, who I have a huge amount of respect for and even got the chance to visit once. PIMCO has made waves most recently because their CEO and co-CIO (didn't know that was a thing, did ya? I didn't either.), Mohammad El-Erian has decided to step down.
For a long while now, El-Erian and Bill Gross, another major figurehead within the PIMCO family, have steered the company together. In my mind, El-Erian was always the warm, fuzzy guy-- quick to dole out smiles, answer questions and shake hands, whereas Gross was always a little more serious-- still smiling and welcoming (at least when I saw him) but definitely more reserved than his counterpart. Together, they were like the odd couple of the fixed income financial market, but somehow it worked. They balanced each other out, and together they formed (what I thought) was a good team. Recently, however, amid news that El-Erian was leaving, there have been reports of a not-so-happy marriage, where Gross has been reported saying (basically) "I have an awesome track record, what do you have?" and El-Erian informing him that (verbatim) "I'm tired of cleaning up your shit."El-Erian's farewell letter is one of the most thoughtful I have ever read (take note-- not on an iPad) and seems like it could be a veiled attempt at stressing that PIMCO should be a "we" and "you" culture, whereas under Gross it was more of an "I" culture.
Regardless, it hits me with a twinge of disappointment that the firm that I had so much respect for has now been reduced to little more than high school-like gossip in the papers. Now that the media smells the blood, they have no shame in publishing things outlining the hearsay of what happened within the firm. They've painted Gross as the snobby, popular girl who mercilessly bullied El-Erian away. Maybe Gross didn't like people making eye contact with him, maybe he did like the floor to be quiet (I can confirm that it was a quieter floor than others I have been on), but calling for Bill Gross to step down seems like a mistake. There is an argument that conservative fixed income investors don't want an old man (that has the view that he is right and everyone else is wrong) taking care of all their money, but Bill Gross is an institution that is intimately intertwined in PIMCO. Losing him, especially after losing El-Erian could leave investors even more wary because both of sources of guidance within the firm would be gone. Un-moored, investors would begin to question whether PIMCO could still consistently provide the returns they have previously promised, and even more outflow could be expected (after a summer of record outflows). No, if I were PIMCO, I would stand strong. Acknowledge the stepping down of El-Erian, recommit to their clients and begin to rebuild. To do otherwise would be like throwing good money after bad.
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