Stocks Are Pimco's "Stepchild"
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Wednesday, August 08, 2012

Stocks Are Pimco's "Stepchild"

Yesterday Bloomberg reporter Alexis Leondis took an in-depth look at the "stepchild" of the Pimco [profile] family, their equity funds. Bill Gross has been trying to build a solid line of equity funds as far back as the 1980s, and so far he's come up short.

Why? Leondis says that the firm's bond-focused culture -- its rigid "party line," in Gross' words -- means that stocks will always be an afterthought, a tension that caused his equity manager to quit following Gross' first foray into stock in the 1980s. And it doesn't help when Gross makes claims about the coming "death of equities," as he did in his newsletter last week.

"I can imagine the equity managers cringed" when they heard that, former Pimco exec Bill Powers told Bloomberg.

Joshua Brown, VP of investments for Fusion Analytics Investment Partners, was blunter. "No one should be surprised that Pimco equity funds are a stepchild," he said. "What they have against them is distaste for open-end mutual funds, dislike for equities and the fact that it's a bond shop in everyone's mind."

The other problem is that Gross' equity funds have simply underperformed, by and large. Gross brought in a team from Franklin Resources to manage EsQ Pathfinder, Pimco's first stock fund, and the $2.13 billion fund is trailing 62 percent of its peers this year. The $519 million Pimco Emerging Markets Fund is behind 90 percent of its peers over the last 12 months.

All told, Pimco's four main stock funds make up under 1 percent of the firm's AUM.

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