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27. Pacific Investment Management Co. / $16.94 billion

Location:

Newport Beach, CA

Founded:

1971

2016 Hedge Fund 100 Rank:

No. 33

2016 Capital:

$15.83 billion

2015 Hedge Fund 100 Rank:

No. 40

2015 Capital:

$14.69 billion

Years on List:

Website:

www.pimco.com

Address:

650 Newport Center Drive
Newport Beach, CA 92660

Phone:

949-720-6000

Fax:

949-720-6361

Profile & News

Firm Overview

Pacific Investment Management Co., the world’s biggest active bond manager, with $1.59 trillion in firmwide regulatory assets under management as of March 2015, sent shock waves down Wall Street in September 2014 when legendary CIO William Gross abruptly left the firm to join Janus Capital Group. While shares of Janus rocketed 43 percent on the news, PIMCO has endured heavy outflows. Firmwide capital dropped from $15.62 billion to $14.69 billion, driven primarily by investor withdrawals. The bond king, as Gross is known, had managed most of the PIMCO’s assets, including the then-$221.6 billion Total Return Fund, and helped transform the California firm into a nearly $2 trillion business. He is credited with founding PIMCO in 1971 alongside James Muzzy and William Podlich, though the business technically existed beforehand (PIMCO was originally a subsidiary of insurer Pacific Mutual Life).

Investor withdrawals overshadow the remarkable gains Gross’s replacements have made since his departure. Mark Kiesel, Scott Mather and Mihir Worah, Total Return’s new managers, helped the fund outperform Gross’s Janus Global Unconstrained Bond Fund, and more than 90 percent of its competitors, by betting short-term bonds were overpriced.

PIMCO’s bit bets on bonds have caused trouble in the past. Interest rates soared when former Federal Reserve chairman Ben Bernanke intimated in spring 2013 that the central bank would soon start winding down the U.S. Treasury’s bond-buying program, only to announce in September that the pullback would not start yet. PIMCO’s Total Return Fund, the world’s largest bond fund, which invests heavily in U.S. government bonds, dropped $46.4 billion in assets in the five months through that October. Investor withdrawals played a major role in the fund’s tumble, as rising interest rates drove investors to decrease exposure to fixed-income assets.

Despite a rocky 2013, Newport Beach, California-based PIMCO has a strong 40-year record of growth and solid performance. Since first appearing on Alpha‘s Hedge Fund 100 ranking in 2010 with $6.9 billion, PIMCO’s hedge fund business has more than doubled capital to $14.7 billion. The New Jersey Division of Investment, the investment management arm of the New Jersey Pension Fund and the State of New Jersey Cash Management Fund, stated in a 2012 year-end report that the PIMCO Distressed Mortgage Fund was the leader in its credit-oriented portfolio, grossing 40 percent returns that year.

Today none of the firm’s co-founders remain with the firm. Muzzy and Podlich exited long before Gross. Gross, 70, was awarded Institutional Investor‘s Money Management Lifetime Achievement Award in 2011. Mohamed El-Erian, a former bond manager at PIMCO who defected in 2006 to run Harvard Management Co., returned as PIMCO’s co-CIO and CEO in January 2009 after longtime chief executive William Thompson retired at the end of 2008. El-Erian, who many suspected would be Gross’s successor, abruptly announced his resignation from PIMCO in January 2014 and officially stepped down in March.

PIMCO is an indirect subsidiary of German insurer Allianz SE, but its operations are separate and autonomous. The two firms merged in 2000 to create the world’s sixth-largest investment management group at the time.

Strategy

PIMCO actively manages equities, mutual funds, exchange traded funds, closed-end funds, collective investment trusts, private investment vehicles and structured products.

Funds and Fees Overview

PIMCO’s fees include a management fee based on a percentage of assets under management and a performance-based fee usually in the form of carried interest, paid quarterly in arrears. Fees for separate accounts are customized, and fees for PIMCO registered funds are outlined in the funds’ offering documents. PIMCO unregistered fund management fees range from 0 percent to 2 percent, and administration fees range from 0 percent to 0.25 percent based on invested and reinvested capital or net asset value.

PIMCO also has wrap program services sponsored by banks, broker-dealers or other investment advisers affiliated and unaffiliated with PIMCO. A wrap fee program is one in which a client pays a comprehensive fee for a bundle of services, including investment advisory services, custody services and the execution of client transactions.

PIMCO Distressed Senior Credit Opportunities Fund II
Annualized Return Since Inception:	18.69 percent	Inception Date:	10/07/2011

PIMCO Absolute Return Strategy IV Fund
Annualized Return Since Inception:	7.29 percent	Inception Date:	09/30/2004

PIMCO Absolute Return Strategy II Fund
Annualized Return Since Inception:	4.49 percent	Inception Date:	08/31/2005

PIMCO Absolute Return Strategy III Fund
Annualized Return Since Inception:	7.62 percent	Inception Date:	04/19/2005

PIMCO Multi-Asset Volatility Fund
Annualized Return Since Inception:	7.77 percent	Inception Date:	07/15/2011

PIMCO Global Credit Opportunity Fund
Annualized Return Since Inception:	7.12 percent	Inception Date:	06/30/2006

PIMCO Absolute Return Strategy V Fund
Annualized Return Since Inception:	14.6 percent	Inception Date:	10/31/2006

PIMCO Tactical Opportunities Fund
Annualized Return Since Inception:	11.61 percent	Inception Date:	02/01/2013

PIMCO Commodity Alpha Fund
Annualized Return Since Inception:	11.55 percent	Inception Date:	02/28/2013

A minimum size of an account managed by PIMCO ranges from $10 million to $300 million. Tailored account minimums may be negotiated.

Clients

PIMCO’s investors include companies, central banks, foundations, endowments, financial advisers, educational institutions, and public and private pension and retirement plans, among others.

Regulatory Assets Under Management (RAUM)*
Discretionary	$1.67 trillion (2,431 accounts)
Nondiscretionary	$5.78 billion (11 accounts)
Total	$1.68 trillion (2,442 accounts)

Employees	2,454
Clients	16,286 total	4 percent non-U.S.
Fiscal Year Ends	December
All data as of December 31, 2014. *Regulatory Assets Under Management (RAUM) includes no deduction of offsetting liabilities, thus representing gross AUM, not net AUM. RAUM calculations include leverage, proprietary assets and uncalled capital commitments, among other items not required in the calculation of AUM.

Owners and Executives

PIMCO changed its lineup of top executives following the departure of former CEO and co-CIO Mohamed El-Erian in March 2014. Founder William Gross became the sole CIO; Douglas Hodge, formerly the COO, took over as CEO; and Paul McCulley, a former high-profile portfolio manager who retired from the firm in 2010, was brought back on as newly-created chief economist in May.

Name	Position
Douglas Hodge	CEO, Managing Director of Executive Committee
Jay Jacobs	President, Managing Director of Executive Committee
Michael Puntoriero	CFO
David Flattum	General Counsel
David Lown	Chief Administrative Officer
Drew Vaden	Chief Technology Officer
Jennifer Durham	CCO
Paul McCulley	Chief Economist
Andrew Balls	CIO (Global), Managing Director of Executive Committee
Dan Ivascyn	Group CIO
Mark Kiesel	CIO of Global Credit
Virginie Maisonneuve	CIO of Global Equities
Scott Mather	CIO of U.S. Core Strategies
Mihir Worah	CIO of Real Return and Asset Allocation
Marc Seidner	CIO of Non-Traditional Strategies