PIMCO Elects Daniel Ivascyn as Group Chief Investment Officer

Firm Names Andrew Balls, Mark Kiesel, Virginie Maisonneuve, Scott Mather and Mihir Worah Chief Investment Officers

• Kiesel, Mr. Mather and Mr. Worah named Portfolio Managers for Total Return Fund
• Saumil Parikh, Mr. Ivascyn, and Mohsen Fahmi named Portfolio Managers for Unconstrained Bond Fund
• Douglas Hodge and Jay Jacobs continue in their roles as Chief Executive Officer and President

September 26, 2014 (Newport Beach, CA): PIMCO, a leading global investment management firm, has elected Daniel Ivascyn to serve as Group Chief Investment Officer (“Group CIO”), succeeding William H. Gross who has left the firm. In addition, the firm appointed Andrew Balls, CIO Global; Mark Kiesel, CIO Global Credit; Virginie Maisonneuve, CIO Equities; Scott Mather, CIO U.S. Core Strategies; and Mihir Worah, CIO Real Return and Asset Allocation. Douglas Hodge, PIMCO’s Chief Executive Officer, and Lew “Jay” Jacobs, President, will continue to serve as the firm’s senior executive leadership team, spearheading PIMCO’s business strategy, client service and the firm’s operations.

The firm also appointed Mr. Mather, Mr. Kiesel and Mr. Worah as Portfolio Managers for the Total Return Fund. Saumil Parikh, Mohsen Fahmi, and Mr. Ivascyn will serve as Portfolio Managers for the Unconstrained Bond Fund. As Group CIO, Mr. Ivascyn will continue to oversee the firm’s alternatives strategies, structured credit, and income strategies. Chris Dialynas, Managing Director and Portfolio Manager, will return to the firm from sabbatical during the fourth quarter of 2014. These changes and appointments are effective immediately.

The headlines continue to generate concern for PIMCO moving forward and has already lead to net outflows for the PIMCO Total Return Fund.  LSA has spoken with PIMCO several times over the last few days to assure that we are able to remain confident in PIMCO’s ability to continue to provide investors the experience we demand of all of our money managers.

The core change in the Total Return Fund is that they are moving from an individual led model to a team lead model, but investment policy will remained unchanged and will continue to have a strong focus on the macro picture.   The three lead managers are all proven money managers, but the fact that Total Return is such a big fund could create some growing pains as these three managers transition to the lead managers of this fund.  LSA has little exposure to the PIMCO Total Return Fund in our strategies.  The only platforms that are being directly impacted by the $550 million in net outflows from Total Return are a couple of VA platforms and 401(k)s.  LSA will continue to monitor this transition period over the next few weeks and if we do not see the flows starting to slow up and the new management team able to establish full control of the fund we will start to move to the sidelines.  That said, we have full confidence that the expertise that exists within the PIMCO family will not only regain control of this difficult announcement but also be able to flourish moving forward.

The CEO Doug Hodge has been communicating to the media and investment groups about Bill Gross’ ‘voluntarily’ exit from PIMCO, and continues to reiterate the succession process that has been in place in the case of this type of event.  There is no doubt that Bill Gross was greatly responsible for the early success of PIMCO and has helped build one of the most respected investment shops in our industry, but this has also come with tremendous talent and leadership that has been added along the way.  Moving forward the PIMCO made a unanimous decision to name Dan Ivascyn as the new lead CIO.

Dan is the current manager of the PIMCO Income Fund.  LSA continues to have a strong conviction in this fund and believes that the Income fund will continue to operate smoothly moving forward.  Dan said that he will continue to oversee PIMCO Income, but will not have the same day-to-day responsibilities.  In his new role, he will continue to operate with ‘shared responsibility’ with the team approach currently in place with the fund.   There is some risk of outflows impacting other PIMCO strategies, but at this time evidence has not suggested that the 75% of assets outside of the core Bill Gross funds is going to experience net outflows moving forward.

There is a lot of speculation as to how this monumental move is going to impact Bill Gross, Janus and PIMCO moving forward.  While these headlines have shocked the industry, when you take a step back and evaluate this new paradigm the question that has to be addressed is “do we continue to have confidence in PIMCO and their vision of growth moving forward?), and as it stands today we have NOT sounded the alarm to step away from PIMCO.