Deputies Empowered

With the deputy CIOs, “it’s about empowerment, expanding the scope of the investment committee process and the range of ideas in recognition of the firm that we have become,” Pimco Chief Executive Officer Doug Hodge said in a telephone interview July 7. “It’s not just about Total Return; it’s about all these other strategies and assets we manage literally all over the world.”

Pimco has prided itself on being a thought leader and a place for intellectual discourse, said Kurt Brouwer, chairman of Tiburon, California-based Brouwer & Janachowski Inc., who has invested in Pimco funds since the 1980s.

New Building

“If it were 2005 and bonds were on a good roll, then the thing about Mohamed and whatever else came up would be long past,” he said. “That came along at a time when many people were concerned about their fixed income allocation in general, so you’ve got both sides of the question.”

The turbulence at Pimco coincided with a big investment in the firm’s future, the move to a new building in May, across Newport Beach’s shopping enclave known as Fashion Island. The new office, which accommodates employees previously housed in two separate buildings, boasts hydraulic desks that can be made into standing workstations, and a cafeteria called the Coastal Café that offers a salad bar, made-to-order smoothies and fresh fruit. The 375,0000-square-foot space has a fitness center and a conference center that can accommodate 150 people, connected via video to all Pimco offices around the world, with a microphone at each seat so everyone can chime in.

The bigger forum meetings, which are held several times a year, now take place in a room with a round table, rather than a rectangular one as in the past. Previously, Gross said investment committee meetings, held four times a week, were often controlled by the “two big pillars” of Gross and El- Erian.

‘On Me’

“People had been silent, afraid, to put strong words on it, to piss one of us off,” he said. “That’s on me, I guess, in terms of not understanding that.”

In public, Gross’s tolerance has limits, particularly if his deputies deviate from the official company view. After Scott Mather, head of global fund management, said on Bloomberg Radio in April that the firm was moving away from its “new normal” thesis, Gross undercut him a week later, saying on air that Mather was “over his skis” and the new normal was alive and well.

Internally, Gross has tried to close ranks, spending more than 20 minutes talking about the media scrutiny that had beset the firm before its secular forum meeting in May, according to two people. He made it clear that he wanted no more leaks to the press, the people said.

Trusted Allies

He has recruited some of his most trusted allies back to Pimco, including Paul McCulley in a newly created role of chief economist, and Sudi Mariappa, rehired as a generalist fund manager to take over responsibilities after the January departure of Marc Seidner, who worked under El-Erian at Harvard Management Co.

As he seeks to project a more upbeat and approachable image of himself, Gross strolled on stage at Morningstar’s investment conference last month in sunglasses to give the keynote address. He admired himself on the screens as a “pretty cool dude” and called himself the bond market’s Justin Bieber. In a 50-minute speech, he reiterated the image of Pimco as the “happy kingdom.”

He also made a lengthy allusion to the movie “The Manchurian Candidate,” suggesting he wishes he could hypnotize journalists into saying that he is “the kindest, bravest, warmest, most wonderful human being you have ever met in your life.”

“Hopefully that will work,” he said. “Maybe not.”
 

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