Pacific Investment Management Co.’s revenue will grow next year as the firm goes through a "renewal" and widens its mix of products, Chief Executive Officer Douglas Hodge said.
Most of the growth opportunities for the firm are outside the U.S. and in non-traditional investments, Hodge said at a conference held by parent company Allianz SE in Munich on Tuesday. While clients have taken money out of traditional products such as Pimco’s flagship Total Return Fund, they’ve been more willing to take on risk by increasing their allocation to credit and income products, private debt and alternative assets, Hodge said.
"That, on the whole, has tended to raise our average fee," he said.
Pimco’s total assets under management amounted to about 1.32 trillion euros ($1.40 trillion) at the end of the third quarter. That included 985 billion euros managed for clients, with about 65 percent in the Americas, 23 percent in Europe and 12 percent in the Asia-Pacific region, according to a presentation on Allianz’s website. Last year, billionaire founder Bill Gross left the company amid a row that’s escalated into a lawsuit.
In addition to adding non-traditional investment products, the firm plans to expand in Asia, Australia and Canada. China, with its increasingly market-friendly regulation and a growing wealthy population, is a "big opportunity" for Pimco, Hodge said. China’s government seems more committed to opening its markets to foreign companies than previous administrations have been, he said.
Pimco’s Total Return Fund had its 30th consecutive month of redemptions in October. The prospect of higher interest rates means Pimco is looking cautiously to 2016, Hodge said. U.S. policy makers are next month expected to increase the federal funds rate for the first time in almost a decade.
"We’re less sensitive than we were historically to a potential tightening cycle," he said. However, as rates go up, it "does have an impact on flows."