Experiential Wealth

Chao Quoted in WSJ: Florida Pension Fund Significantly Reducing PIMCO Exposure

Oct 7, 2014 | Company News, Everything Else, Institutions, Opinions, Plan Sponsors

Philip Chao, Principal and Founder of Chao & Company, was recently quoted in a Wall Street Journal article regarding Bill Gross’s departure from PIMCO. For your convenience, the article is reproduced below, or you can find it online by clicking the following link: http://www.wsj.com/articles/florida-pension-fund-significantly-reducing-pimco-exposure-1412715937#livefyre-comment

Bill Gross Departure Factor in Decision, Spokesman Says

Bill Gross left Pimco abruptly last month. Image credit: Reuters

By Kirsten Grind and Dan Fitzpatrick
The Wall Street Journal
Updated Oct. 7, 2014 7:47 p.m. ET

The Florida State Board of Administration plans to pull more than $2 billion from Pacific Investment Management Co. following the departure of co-founder Bill Gross in late September.

The decision appears to represent the biggest movement of funds disclosed by a public agency since Mr. Gross unexpectedly resigned from Pimco on Sept. 26. to join rival Janus Capital Group Inc.

The Florida agency that oversees the state’s retirement plans has kept Pimco on a “watch list” of companies under scrutiny since the fourth quarter of 2013, in part because of a Pimco management shake-up and spotty performance in the firm’s flagship Total Return fund, which Mr. Gross managed.

The traditional pension plan overseen by the agency currently manages $146 billion, making it fifth-largest public plan in the U.S. after similar plans overseen by retirement systems in California and New York.

That fund will “significantly reduce” its $1.9 billion invested with Pimco, according to an email from a spokesman for the Florida agency.

The cuts likely will affect a majority, but not all, of the $1.9 billion. The funds will be distributed internally and among existing external managers such as BlackRock Inc. and Neuberger Berman, competitors to Pimco.

The agency also plans to cut roughly $1 billion from Pimco funds housed in a smaller, less-traditional state retirement plan managing nearly $9 billion. Those assets will move to BlackRock, the spokesman said in the email.

A Pimco spokesman didn’t return requests for comment. The Newport Beach, Calif.-based firm, with about $2 trillion in assets under management, is a unit of German insurer Allianz SE.

Pimco saw large investor outflows for more than a year before Mr. Gross’s exit, but they accelerated after his resignation was announced. In September, investors pulled a net $23.5 billion, Pimco said last week, with the majority of that money leaving on the day Mr. Gross left the firm. The monthly outflow set a mutual-fund-industry record.

Some investors say they are staying with Pimco.

Philip Chao, whose Vienna, Va.-based firm manages about $1 billion in retirement and other assets for clients, said he doesn’t plan to advise clients to leave the firm just because Mr. Gross did. “Let’s not fool ourselves, Bill was very relevant and important,” Mr. Chao said. “But Pimco is way, way larger than he is.”

Write to Kirsten Grind at kirsten.grind@wsj.com and Dan Fitzpatrick at dan.fitzpatrick@wsj.com

Copyright ©2015 Dow Jones & Company, Inc. All Rights Reserved