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Monday, October 24, 2011

Kashkari Explains Pimco's Equity Bet

News summary by MFWire's editors

Bill Gross and the folks at Pimco [see profile] are making an equity investment in former TARP chief Neel Kashkari. Pimco's challenge, reports the San Francisco Chronicle, is that there can't be another 30-year bull market in bonds as interest rates cannot go any lower. Kashkari, who is not yet 40, is therefore leading Pimco's bet that equities can see a 30-year bull run.

Neel Kashkari
Head of Global Equities
"Interest rates can't go lower," Kashkari tells the paper. "There can't be another 30-year bull market in bonds."

Kashkari joined Pimco two years ago after leading the the Treasury Department's "Troubled Asset Relief Program" as a 35-year-old staffer. Kashkari joined the Treasury from Goldman Sachs.

The experience overseeing TARP added 20 pounds and burned out the man who People named one of the "sexiest alive" in 2008. To detox, the paper reveals that he "holed up in a cabin in Northern California for several months to detoxify."

Kashkari gives some hints of Pimco's plans while sipping a Coke Zero.

"You're not going to see us launch some plain, old U.S. large-cap fund or just tell people to go buy the S&P 500," he revealed to the paper. Instead the Pimco products will leverage the firm's abilities in currencies and macroeconomics to remove volatility from portfolios based on well-researched global stock picking.

Pimco's debut equity fund, Pimco EqS Pathfinder, has topped its peer group by roughly 70 basis points over the past 12 months. This year Pimco also opened EqS Emerging Markets and Emerging Multi-Asset. The company now runs about $4.5 billion in the three funds. Overall, Pimco has $1.3 trillion under management.

He tells the paper that he spends "a lot" of his time recruiting PMs, though the task is made simpler by PMs reaching out to him. (He already landed some equity managers from Franklin Templeton Investments, Capital Group and Goldman Sachs Asset Management.)

"'I get cold-called by the bluest of blue-chip managers'" who complain that their employers are more focused on marketing than investing," he tells the Chronicle. . 

Edited by: Sean Hanna, Editor in Chief

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