The firm’s flagship fund, the Pimco Total Return, has suffered more than $100 billion of net outflows since Gross left through the end of August 2015, according to Morningstar. “Plus, without his [taking] 20% of the bonus pool, there’s a bigger slice of the pie for others”.
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“Their improper, dishonest and unethical behavior must now be exposed”, the veteran financial manager said in the suit, in which he is seeking at least $200 million in damages.
PIMCO also allegedly denied Gross his third quarter bonus payment of almost $80 million.
Gross’ suit calls his opponents “money-driven” and a “cabal” of “conspirators” motivated by “greed” in their goal to oust him and take his share of Pimco’s enormous bonus pool.
On the surface PIMCO management tried to appear to be even handed, but in reality an agenda started to emerge, Gross charged.
The complaint in particular targets Andrew Balls, the company’s chief investment officer for global fixed income, whom Gross accuses of leaking information about high-level executive clashes to the Financial Times and The Wall Street Journal. Over the following months he became embroiled in a bitter public exchange with his former right hand man Mohamed El-Erian, who has now also left the group.
Like the newsletter items he is famous for, Gross’s complaint strays far afield before coming to its point.
According to the lawsuit, El-Erian tried to bring new asset classes and “high risk” derivatives to the traditional bond shop, transforming it into a “general-purpose investment management firm”. So you can see why Gross wanted to tell his side of the story.
He downplayed El-Erian’s success running Harvard University’s endowment fund, noting it came during the “bubble” of the mid-2000s.
Mr Gross claims that he began negotiating to resign from the group as chief investment officer and reduce his bonus but younger executives sought to cut him out of the company completely.
That’s when, according to Gross, everyone turned on him.
In the complaint, Gross said his falling out with El-Erian was prompted by a difference in strategy.
Both the initial Financial Times article and numerous follow-up media pieces heaped 18 praise on El-Erian and cast criticism on Mr. Gross.
El-Erian, the son of an Egyptian diplomat, was Pimco’s head of emerging markets trading from 1999 to 2006 before being lured away by Harvard University to manage its $30 billion endowment. Pimco says Gross’s case is without merit. We hold ourselves to the highest standards of excellence and performance, and I ask of others only what I demand of myself: “hard work, dedication and intense focus on putting our clients first”.
Gross’s current employer, Janus Capital, declined to comment, and his personal spokesman didn’t respond to a request for comment.
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It’s negative scrutiny, and a potential payout, that Pimco won’t particularly enjoy.
