Pimco Ends Three-Year Bleeding as Allianz Sees Turnaround
(Bloomberg) -- Pimco has finally stopped the bleeding.
Third-party clients added a net 4.7 billion euros ($5.1 billion) in new money to Newport Beach, California-based Pimco last quarter, according to a statement Friday by its parent Allianz. The inflows cap three years of net redemptions that have cut assets at the money manager by about a quarter, to $1.55 trillion at the end of September.
"Pimco is turning the corner," Allianz Chief Financial Officer Dieter Wemmer said in a Bloomberg Television interview with Anna Edwards and Yousef Gamal El-Din.
The reversal bodes well for Emmanuel Roman, the hedge-fund veteran who took over as Pimco's chief executive officer this month with the mandate to broaden a fund offering that's still dominated by fixed-income products. Allianz, which has owned Pimco since 2000, has said it expects the firm to reverse redemptions this year and reduce expenses further as the business stabilizes.
Pimco's numbers also looked "positive" in October, Wemmer said in a call with journalists, adding that the firm's new CEO "will get time to take a look at the company and the options and then we will intensively discuss the future of Pimco with him."
Wemmer said the third-quarter inflows don't include commitments to private funds, which are counted as new money only when they're called to make investments.
Pimco has "done a very successful placement of private funds in less liquid alternatives," Wemmer said in the interview.
Pimco had been struggling to contain outflows since a bond selloff in 2013 known as the "Taper Tantrum." Redemptions worsened after the surprise departures of Mohamed El-Erian and founder Bill Gross in 2014, which revealed deep rifts between Gross and some of his top lieutenants. The flagship Pimco Total Return Fund — once the world's largest mutual fund — has dwindled by more than 70% to $83 billion from its a peak of $293 billion in 2013.
Third-party assets under management increased to 1 trillion euros from 995 billion euros at the end of the second quarter "due to favorable market impact and third party net inflows," which were "more than compensating for adverse" foreign-exchange effects, Allianz said. The inflows came from "several strategies like income, investment-grade credit and global," the company said in a presentation on its website.
Shares of Allianz rose 1.9% to 151.60, the second-biggest gainer in the 32-member Bloomberg Europe 500 Insurance Index. The stock has lost 7.3% this year.
Lower fees from dwindling assets, along with a bonus program introduced at the end of 2014 to retain talent, had been pushing up costs as a share of revenue. The ratio improved to 57.5% in the third quarter from 58.6% a year earlier, as the impact from the bonus program waned. Allianz set a target for the ratio of below 60% for this year.
Operating profit at Pimco declined to 455 million euros in the quarter from 500 million euros a year ago, Allianz said.