The high-profile departure of Bill Gross has cost Pimco another customer.
As the fallout continues since Gross left the Newport Beach, California-based asset manager last month, the Arkansas Teacher Retirement System said it has cut ties, according to a report in Pensions & Investments.
Pimco had managed about $475 million for the fund as part of its Total Return strategy.
The news comes a week after the Florida state system said it was “significantly” reducing its investments with Pimco, which Gross founded 43 years ago.
Investors in September yanked $17.9 billion from the firm’s Total Return mutual fund, which nevertheless remains atop its category with $201.6 billion under management, according to Morningstar. That total, though, is down by more than 27 percent from its peak.
George Hopkins, executive director of the Arkansas pension system, said the decision came about due to two factors: a desire to lower risk in the fund’s fixed-income portfolio and as a reaction to Gross leaving for the much-smaller Janus Capital, where he will manage an unconstrained fund.
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Pimco strategists recently released an analysis saying the firm considers high-yield bonds a “compelling” opportunity. It was not clear if that approach or the report had anything to do with the Arkansas system’s decision. The fund keeps a diversified portfolio that has its highest concentration in global equity, followed by U.S. equity and fixed income, according to its website.
However, it was pretty clear that Gross’ exit had a negative impact. The messy departure “came at an inopportune time,” Hopkins told P&I.
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While Janus, with $177.7 billion under management, is dwarfed by Pimco’s $1.87 trillion, analysts expect the gap to narrow at least somewhat. Industry experts interviewed by P&I for a separate report said they see assets for Janus increasing 25 percent over the next several years, due largely to an influx from retail, rather than institutional, investors.
“Without a doubt it’s transformational for Janus,” said Jason Weyeneth, analyst at Sterne Agee. He predicted Janus would see an inflow of $45 billion by the end of 2016.
Pimco’s assets under management total, reported as of the end of the third quarter, represents a 5 percent drop over the past three months.
A Pimco spokesman did not immediately return a request for comment.
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