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Rating:Is Pimco's Maisonneuve Hinting at an Alts Push? Not Rated 3.0 Email Routing List Email & Route  Print Print
Wednesday, February 26, 2014

Is Pimco's Maisonneuve Hinting at an Alts Push?

Reported by Tommy Fernandez

(WARNING. This story does not touch upon the ongoing brouhaha over Bill Gross's purported management style. If you must indulge your schadenfreude, go here and here.)

Is Pimco ready to test out the equity alternatives waters? If you take a look at comments made today by recently-minted deputy chief investment officer Virginie Maisonneuve, you just might get that impression.

Note, in particular, this paragraph from her comments:

Nothing is set in stone, but we will carefully consider adding more equity pillars to complement our existing ones and, as I mentioned, seek to provide strategies for achieving alpha in ways that meet clients’ objectives. These might include ways to exploit market inefficiencies such as via a focus on growth or regions, or an emphasis on portfolio construction, for example using a fundamental benchmark or including tail risk hedging. Again, we have not determined specific strategies to add, and are weighing solutions with the potential to benefit clients.

In short, there are three good reasons to believe that Pimco will make a solid go into liquid alts in the near-to-moderate future.

REASON 1: They Have the Interest
Pimco, in fact, has made no efforts to hide its interest in the alternatives space, according to Josh Charlson, director of alternative funds research at Morningstar. For the past year, the firm has been signaling an interest in alts, which was noted in this August 2013 Wall Street Journal article by Kristen Grind.

For example, Pimco's newly-minted CEO, Doug Hodge, will be delivering a keynote speech on the subject of alts managers entering '40 Act Country at the 2nd Annual Liquid Alternative Strategies conference in late April.

"Liquid alts are really not that much of a hidden or secret ambition on their part," Charlson told MFWire. "This is something that is very much on their agenda."

And with Maisoneuve, previously global equities chief for Schroders, now serving as Pimco's new global equities chief, the firm may be looking to supercharge its faltering equities operations with alts products.

REASON 2: They Have the Capability
Pimco already has 12-years of experience with alts strategies. According to the firm's website, it managed, as of May 31, 2013, approximately $25.8 billion in alternative strategies, including $12.3 billion in hedge funds and $13.5 billion in cumulative capital commitments to opportunistic funds.

It even launched a managed futures fund earlier this month. That fund, Charlson said, launched big with $200 million in assets out of the gate with some big clients.

And the tail risk hedging strategy noted by Maissonneuve is already "well-regarded" according to Charlson. The strategy is often used as an overlay by other funds. For example, Pimco's tail risk hedging strategy is used as part of its target date funds.

Moreover, Charlson said, "they have a lot of experience in quantitative strategies. They do a lot of work in factor-based models which is often a component of alternative strategies."

"What they are hoping to do is keep the capabilities that they have in-house where they have already been using either within an asset allocation context or where others have even been using them as diversifiers or risk reduction, or on the hedge fund side," he said.

REASON 3: They Have the Sales Infrastructure
One of the challenges with launching liquid alts is having a big enough sales team-- with the right connections AND the brain power to tell complex tales to skeptical sales prospects. In fact, the lack of this kind of infrastructure is usually what dooms most alts emigres into '40 Act Country.

Pimco already has this infrastructure in aces, and loads of adoring clients to boot.

"They have a huge advantage. They already have a very strong distribution and they have experience working with fairly complex strategies," Charlson said.

Not a Bliztkrieg, But an Invasion
Charlson said that Pimco likely won't roll out with loads of alts at one time, rather "it is going to be a little more cautious, a little more strategic, more prudent."

But don't expect them to be timid either. After all, this is a firm known for launching conga lines on the trading floor (NOTE: Sorry. Sorry. Couldn't help it.)  

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