In the weeks leading up to Pacific Investment Management Co.’s annual forum in May that sets the firm’s long-term investment outlook, Bill Gross was facing internal dissent.

At investment committee meetings in April and May, four of his six newly appointed deputy investment chiefs questioned whether their boss, manager of the world’s biggest bond fund and an investing legend, was too pessimistic about the economy. Mark Kiesel, Pimco’s head of corporate bonds, said that the U.S. energy industry would help propel faster growth than expected and that employment was stronger than his colleagues were seeing, according to four people familiar with the matter.

The debate, at a firm where dissidents in the past faced mockery or worse if they challenged the bond king’s views, had been encouraged by Gross himself, who has been battling criticism of his autocratic leadership style since the surprise resignation of his former heir apparent Mohamed El-Erian in January. Yet his dissenters may also have been emboldened for another reason: most of them -- Kiesel, mortgage expert Daniel Ivascyn and Europe chief Andrew Balls -- are beating a majority of rivals this year. Gross, 70, is trailing peers in his main fund for a third year in four.

“It’s time for Pimco to be driven less by Gross’s strong personality and more by strong team performance,” said Erik Gordon, a professor at the University of Michigan’s Ross School of Business. “Bill and his vicissitudes have become a distraction from what investors want from Pimco. They want performance.”

Reshaping Pimco

Pimco, based in Newport Beach, California, is seeking to reshape itself after a tumultuous period. The firm, which had surged to $2.04 trillion in assets in March 2013 from about $400 billion a decade earlier, has shrunk by $100 billion since then through March 31, in part because of wrong-way calls by Gross on the economy. His Total Return Fund has declined to $225.2 billion from a peak of $293 billion in March 2013, as investors pulled money for 14 straight months, the longest streak of redemptions. Rivals such as BlackRock Inc. attracted new money into key bond strategies in the same period.

The discord culminated in the surprise departure of El- Erian this year, who left amid reports of clashes with Gross that painted the Pimco co-founder as an autocrat who didn’t tolerate dissent. Gross had previously said on several occasions that he could run Pimco’s $2 trillion in assets on his own, if only El-Erian would let him, according to a person with knowledge of the matter, who like the others, asked not to be identified because the meetings were private.

Pimco, a unit of Munich-based insurer Allianz SE, responded to the departure by appointing six deputy investment chiefs, who take turns heading the investment committee meetings that Gross used to control, and by allowing more debate, according to three of the people.

‘Bond People’

“The investment committee had been dominated by bond people,” who tend to be the type of people who see the proverbial glass as half-empty, Gross said in an interview June 19 in Chicago. With the deputy CIOs and Anthony Crescenzi, market strategist and executive vice president, Gross said “the committee is more evenly balanced in terms of optimism and pessimism.”

At meetings, Kiesel has expressed optimism about a U.S. recovery as it experiences an energy revolution, as the private sector heals and employment is growing, said four people with knowledge of the discussions. Pimco equities chief Virginie Maisonneuve has asserted that stocks will rise faster than the 5 percent rate predicted by Gross. Ivascyn said home prices will rise 3 percent to 5 percent per year for the next two years.