MutualFundWire.com: Did Bill Gross Really Pay Himself $200 Million Last Year? Reuters Investigates

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Tuesday, July 31, 2012

Did Bill Gross Really Pay Himself $200 Million Last Year? Reuters Investigates

This weekend the New York Times gave Pimco's Mohamed El-Erian a long profile, but Felix Salmon of Reuters writes that the story still doesn't get to the bottom of a few Pimco mysteries. First, he wonders, did El-Erian really make $100 million last year, as the Times claims? And did Bill Gross really pay himself $200 million?

Well, "that kind of payday is within the realms of possibility," Salmon writes, but given that Gross finished 2011 with a performance in the bottom 10 percent of his peers, "it's hard to see how he could justify extracting $200 million from Pimco's investors."

Salmon fact-checks several other claims that Times reporter Geraldine Fabrikant makes, casting doubt on her assertion that El-Erian is a mediocre trader and had a poor record running Harvard's endowment. But the main problem with the profile, according to Salmon, is that it doesn't address the really big issues surrounding Pimco. Is El-Erien being groomed to replace Gross? What will happen to the firm when Gross retires? And does these two traders' big media push distract them from their money-management duties?

But the most fascinating question involves the firm's rivalry with BlackRock. To wit:

Finally, and most interestingly, how did Larry Fink manage to amass twice Pimco’s assets under management despite the fact that Bill Gross, the greatest bond investor of all time, had a more than 15-year headstart on him? What is the story of Blackrock vs Pimco, and how is it likely to play out in future? In order for Pimco to effectively compete with Blackrock, will it too have to go public? (Incidentally, Fink was paid $21.9 million in 2011.)