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Gross To Have Final Laugh? Whopping Two-Thirds Of PIMCO's Flagship Fund May Be Withdrawn

Tyler Durden's picture




 

The reason why the first article we wrote on Friday after news hit that PIMCO co-founder was shockingly leaving the firm on Friday, was listing the massive bond fund's biggest holdings, was because it was only a matter of time: it, being of course, the massive redemptions that would follow Gross' departure by people that his 30+ tenure at the bond fund made very rich, and who couldn't care less about a brief central planning-inspired flame out. After all Gross isn't the first person who has lost the plotline due to the Fed's manipulation of every market.

So just how bad is it? Not for Gross of course: he has made his billions and is simply doing what he and Icahn do in their age: what they love. No, for Pimco, where the redemptions requests are already flooding in. According to the WSJ, just two days after the Gross announcement (both of which non-workdays), already some $10 billion has been withdrawn. And that is just the beginning:

Pacific Investment Management Co. suffered roughly $10 billion of withdrawals following the Friday departure of co-founder Bill Gross, a person familiar with the matter said, a sign of how quickly Mr. Gross's surprise move is reshaping the bond-investing landscape.

 

Pimco is bracing for more outflows on the heels of the veteran investor's departure after months of internal strife over his leadership. At the same time, some managers say they remain committed to the firm.

 

Some within the Newport Beach, Calif., investment firm are projecting it will lose at least $100 billion or more in assets due to withdrawals, the person familiar with the matter said, and some analysts peg the estimate higher.

 

Pimco Chief Executive Douglas Hodge said in a statement his firm "manages nearly $2 trillion in assets, and we are confident that the vast majority of our clients will continue to stand with us."

Will they? Remember: it wasn't Allianz, or Pimco, or some bond manager that was unknown until the El-Erian shake up earlier this year, that gave the Newport Beach bond manager $2 trillion in AUM. It was Bill Gross. And it would be a fitting farewell for Gross, who departed his former employer in what some say was a bout of rage, that his departure would also lead to the effective closure or outright liquidation of a bond fund which is forced to dump more than half of its holdings... at firesale prices in a bidless market!

The flight of $100 billion, more assets than many mutual funds hold, could roil some parts of the bond market with limited trading activity, experts say, as Pimco sells assets to meet investor redemptions and other managers put new money to work.

Rivals are trying to position themselves to attract some of the Pimco outflows.

"There is a good chance that Pimco will lose its dominant position as a fixed-income manager as assets find their way into other investment managers, thereby leveling the playing field in fixed income,'' said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading in New York at Deutsche Bank's private wealth-management unit.

So far the biggest winner is the man many have coined the next bond king: "Competitor DoubleLine Capital saw its biggest inflow of the year Friday, taking in "hundreds of millions of dollars," said Jeffrey Gundlach, chief executive."

In the meantime, PIMCO, now ex-Gross is celebrating:

Even as Pimco prepared for some investors to follow Mr. Gross, Mr. Hodge said executives at the firm felt an "overwhelming" sense of excitement at the giant asset manager, which has been besieged with negative publicity, spotty performance in its flagship fund that Mr. Gross managed and investor outflows in that and other funds in recent months.

Sadly, the celebrations may end quickly if Kepler Cheuvreux 's take on the situation is proven correct.

Earlier today the French bank said that investors may withdraw a gargantuan $150 billion of Total Return Fund’s $221 billion AUM, which is also more than 10% of Pimco’s $1.44 trillion 3rd party AUM.  The report said that Pimco operating profit may drop almost 15% on withdrawals following CIO Bill Gross’s departure. Translated: no bonuses for anyone celebrating today. Of course, the shareholders were already hit when the stock of Allianz tumbled by 6% on Friday.

And if the liquidations accelerate, especially considering the woeful state of bond market liquidity these days when PIMCO suddenly becomes such a major player on the offer side the Fed may have to launch QE just to absorb what PIMCO has to sell so as to not crush the bond market, it is none other than Bill Gross who will have the final laugh, especially if he is able to pick off the bonds his former employer is liquidating in a blue light special.

 

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Mon, 09/29/2014 - 15:18 | 5267952 One And Only
One And Only's picture

Whoops

Mon, 09/29/2014 - 15:25 | 5267973 Canadian Dirtlump
Canadian Dirtlump's picture

I'm on record in the halls of Zerohedge as stating, without a doubt, that bill gross possesses the most powerful bowl cut in the financial industry. Janet Yellen and Mary Jo white have decent apprentice bowl cuts, but Gross, he has a journeyman monastic masterpiece and this article proves that like sampson, it is imbued with truly remarkable power.

 

There's hell toupee over at pimco now.

Mon, 09/29/2014 - 15:27 | 5267982 Tom Servo
Tom Servo's picture

I removed it out of my 401k last Friday afternoon...

 

kthxbye~

 

Mon, 09/29/2014 - 15:30 | 5267991 Winston Churchill
Winston Churchill's picture

You still have a 401k ?

Mon, 09/29/2014 - 15:32 | 5267995 Tom Servo
Tom Servo's picture

Unless there's a way of removing myself from it while still employed that I don't know about, I am kind of stuck with it until I quit or get fired...

 

 

Mon, 09/29/2014 - 15:34 | 5268009 One And Only
One And Only's picture

You still work? Loser.

Mon, 09/29/2014 - 15:48 | 5268049 X.inf.capt
X.inf.capt's picture

that is NOT nice, one!

that was MEAN!

signed, capt, us army, RETIRED!

Mon, 09/29/2014 - 15:54 | 5268070 Tom Servo
Tom Servo's picture

I need the structure in my life, or i'll drink cheap wine and troll ZH all day...

 

Mon, 09/29/2014 - 16:07 | 5268100 Canadian Dirtlump
Canadian Dirtlump's picture

Now you drink expensive wine and troll it at night then?

Mon, 09/29/2014 - 16:09 | 5268107 teslaberry
teslaberry's picture

what's wrong with cheap wine?

Mon, 09/29/2014 - 16:30 | 5268155 falak pema
falak pema's picture

the sign of a connaisseur is one who buys good cheap wine instead of buying expensive run of the mill. 

Mon, 09/29/2014 - 16:35 | 5268180 LawsofPhysics
LawsofPhysics's picture

...or owns his own vineyard...

Tue, 09/30/2014 - 04:03 | 5269949 StychoKiller
StychoKiller's picture

Meh, you can always brew yer own...

Mon, 09/29/2014 - 15:34 | 5268007 kaiserhoff
kaiserhoff's picture

and liquidity sucks in all the markets now.

Anyone else see a black swan?

Mon, 09/29/2014 - 15:53 | 5268062 aVileRat
aVileRat's picture

Note Pimco total return was pretty much front end to 10y long, so liquidating that book would be pretty easy. Esp if you can simply sell the entire book to a dealer that then for a fee sells the best positions back to Janus. And dumps the other stuff back to the Fed via REPO or QE days.

Big Difference between redemptions on the front end and an illiquid LTCM dramabomb. Unless Bill did something really stupid and invested in Long-tail unhedged Russian bonds in April when he was on CNBC saying Russia was a screaming buy.

This being said, it would be ironic if the new normal blew up all because Bill was over-marking his IYG's and undermarking his D2's. The Mohammad Bloomberg Comment on that "told you so" would be legendary.

Mon, 09/29/2014 - 16:09 | 5268105 MollyHacker
MollyHacker's picture

Maybe Bill Gross's departure qualifies as a red herring.

Mon, 09/29/2014 - 16:24 | 5268147 Pool Shark
Pool Shark's picture

 

 

Chose One:

1) Red Herring

2) Black Swan

3) White Elephant

 

Mon, 09/29/2014 - 16:45 | 5268209 Mojeaux18
Mojeaux18's picture

What about a Pig?  And what collor is it?
Bulls and Bears and the pigs get slautered. 

Mon, 09/29/2014 - 16:49 | 5268221 Grinder74
Grinder74's picture

4) Purple Cow?

Mon, 09/29/2014 - 17:43 | 5268383 A Nanny Moose
A Nanny Moose's picture

I prefer my elephants in pink...hic!

Mon, 09/29/2014 - 15:37 | 5268004 knukles
knukles's picture

Well, kinda he who gets what last laugh?  I know, I know.  But the mess happened on his watch when he was the Bond King of the World at PIMPCO.
Aye, he might be laughin' an a' sayin' he was done wrong, but his conscience will bother him with that.
It was His Firm, on His Watch when It Crumbled.
He was the King
But He only Built a Fragile Empire of the Temporal

PS  About 3 hours ago, the 10's and 30's were up about 10 and 22 ticks, respectively.  That's right about where they are, now.

I'd be one hell of a lot more worried about the swaps and other strange pieces of second and third order effect paper being held.  Maybe some puts back to some unprepared dealers?  Maybe some odd collateral calls?

Mon, 09/29/2014 - 15:58 | 5268066 MsCreant
MsCreant's picture

I love it when Ponzi scammers get into public cat fights with one another. Houses of cards don't stay standing long with all that commotion going on. 

If everything is based on fractional reserve logic, (I mean everything sweet heart), then I gotta question?

Where is the loot?

Trick question.

I love the sound of stampeding black swans in the morning. The first birds to fly first, fly best. The other bird brains will be holding bags of bird do and bird don't. 

Dude did this on purpose. 

If he ignites something, the bear will be loose in the market place. We need more big Ponzi scammers to do the same.

I can dream, I know, I know.

Mon, 09/29/2014 - 16:28 | 5268153 Pool Shark
Pool Shark's picture

 

 

When the elephants are dancing; it's best to stay off the dance floor...

 

 

Mon, 09/29/2014 - 17:22 | 5268320 TruthHunter
TruthHunter's picture

stay off the dance floor...

Especially if you are a wise elephant?

Tue, 09/30/2014 - 04:06 | 5269953 StychoKiller
StychoKiller's picture

Elephants were once used in India to execute people (by squishing the person's head with a very large foot!)

Mon, 09/29/2014 - 18:28 | 5268522 LordEffingtonTh...
Mon, 09/29/2014 - 15:41 | 5268028 dow2000
dow2000's picture

You just know his new employer shorted all the most illiquid issuances.  They now get to cover and go long at rock bottom. If I were a regulator, I'd be taking a long hard look at that right now.  Which is exactly why I am not a regulator, must learn to look other way!

Mon, 09/29/2014 - 15:21 | 5267962 Seasmoke
Seasmoke's picture

Better be very careful Mr. Gross

Mon, 09/29/2014 - 15:23 | 5267967 youngman
youngman's picture

Well if Groos is smart..and he is...Pimco has to sell all those bonds to turn to cash I would assume...and that will drop the price....and then the monies will be turned over to Bill..who can buy again on the cheap....ride the wave of greed baby....

Mon, 09/29/2014 - 16:00 | 5268088 MsCreant
MsCreant's picture

And if he can get a cascade effect started in the rest of the market?

Mon, 09/29/2014 - 16:27 | 5268152 negative rates
negative rates's picture

Again, it takes one to know one.

Mon, 09/29/2014 - 15:23 | 5267970 JailBank
JailBank's picture

Well that good be interesting watching this liquidation.

Mon, 09/29/2014 - 15:26 | 5267975 CHX
CHX's picture

Forward, Belgium.

Mon, 09/29/2014 - 15:25 | 5267976 Freddie
Freddie's picture

They should move it to Fidelity Magellan.  I heard that is a good one.

Mon, 09/29/2014 - 17:42 | 5268380 Jumbotron
Jumbotron's picture

<chuckle>    Good one.  : )

Mon, 09/29/2014 - 15:56 | 5267977 Kaiser Sousa
Kaiser Sousa's picture

and this would explain yet another inexplicable reversal of all losses in the Fraud Markets in the last 30 minutes of trading in NY wouldnt it?????
a complete fucking farce....

and of course the day wouldnt be complete without a slap down in the phony paper prices of the only 2 forms of real money on the Globex after trading sideways ALL DAY LONG....

http://www.kitco.com/charts/livesilver.html

Mon, 09/29/2014 - 15:29 | 5267985 F0ster
F0ster's picture

Speaking from experience it is much easier and cleaner to destroy your former company / business partners from the outside by picking it to pieces and having your clients follow you, than try to LBO or somesuch other hostile maniouvre.

Mon, 09/29/2014 - 15:31 | 5267990 JRobby
JRobby's picture

Redistribute

Mon, 09/29/2014 - 15:31 | 5267992 JayKitsap
JayKitsap's picture

Yes new company buying when there are no others with lots of willing sellers in a fire sale.  Could be profitable, possibly wildly profitable.

Meanwhile PIMCO may have sc*ewed the pooch

Mon, 09/29/2014 - 15:36 | 5268011 p00k1e
p00k1e's picture

“the vast majority of our clients will continue to stand with us.”

‘stand with us’

It never was about profit.  It’s about name recognition or investing with the cool kids.  LOL  

Mon, 09/29/2014 - 15:36 | 5268012 Duffy
Duffy's picture

There's always money in the banana stand.

 

Or in raping poor countries trying to get back on their feet like Argentina - waiting for a timely ZH article on Paul Singer

Mon, 09/29/2014 - 15:37 | 5268013 taketheredpill
taketheredpill's picture

 

 

Guess they were afraid to ask for a non-compete.  He would have just told them to fuck off.

 

If Pimco was putting pressure on him for a drop of 3% of aum...seems like a bad call in hindsight.  Wonder who at Allianz is starting to drink heavily.

 

And Gross will get a heads up from clients looking to move (i.e. sell).

Mon, 09/29/2014 - 15:38 | 5268016 WTFUD
WTFUD's picture

Gotta go where you can secure the additional 0.000625% point OR with whom has the best pedigree mercenaries in tow.
This could be the catalyst for these Oligaffs to turn on each other for diminishing returns.

My money is sitting on the sidelines in anticipation of a bonfire sale. Heard Kerry's face grew several more inches and he needs a bigger yacht so i'm ready to pounce with an offer on his current one.

Mon, 09/29/2014 - 15:43 | 5268043 p00k1e
p00k1e's picture

Which bond fund did your bank inadvertently ‘sideline’ you into?

 

 

A Jew, a Catholic and a Mormon were discussing their families.
Jew: I have enough children to start my own baseball team
Catholic: So What? When my wife delivers in the fall, I can start my own soccer team!
Mormon: I got you all beat. Two more wives and I’ll have my own private golf course.

Mon, 09/29/2014 - 19:20 | 5268688 VAD
VAD's picture

That's a lot of holes.

Mon, 09/29/2014 - 15:42 | 5268031 SDRII
SDRII's picture

cant help but notice the Commerzbank money laundering allegations today, the DB Fed investigation and now Allianz owned PIMCO...

http://www.zerohedge.com/news/2014-01-19/germany-has-recovered-paltry-5-...

 

Mon, 09/29/2014 - 15:56 | 5268075 kchrisc
kchrisc's picture

Being that nearly all transaction are now "regulated," and/or illegal, one could say that all transactions are "money laundering."

An American, not US subject.

 

"Honey! I money laundered you some flowers at the flower shop."

Mon, 09/29/2014 - 15:41 | 5268035 Kreditanstalt
Kreditanstalt's picture

S & P buying panic in full swing as we speak...3:30 RAMP UNDERWAY.

Mon, 09/29/2014 - 18:26 | 5268511 Freddie
Freddie's picture

Short covering (sic)

Mon, 09/29/2014 - 15:51 | 5268060 kchrisc
kchrisc's picture

Like a collapsing extension ladder with a pail of paint attached.

An American, not US subject.

Mon, 09/29/2014 - 16:12 | 5268115 taketheredpill
taketheredpill's picture

 

 

 

Surprised it took 14 years for Allianz to fuck it up...guess the Insurers aren't as nimble as big banks.

 

 

Mon, 09/29/2014 - 16:20 | 5268119 g'kar
g&#039;kar's picture

gross mismanagement

Mon, 09/29/2014 - 16:16 | 5268128 Quantum Nucleonics
Quantum Nucleonics's picture

I pity the poor souls at Janus who are meeting their new boss, Bill "F-bomb Tirade" Gross, this afternoon.

Mon, 09/29/2014 - 16:22 | 5268140 The Reich
The Reich's picture

aaaaaand...

 

it's gone.

Mon, 09/29/2014 - 16:33 | 5268166 LawsofPhysics
LawsofPhysics's picture

Blah, blah, blah, I am sure The Fed will raise rates...  ...any second now...

Mon, 09/29/2014 - 16:34 | 5268169 Duffy
Duffy's picture

I bet you those maturity dates are bullshit....

Mon, 09/29/2014 - 16:35 | 5268175 CIABS
CIABS's picture

The headline of this article is intentionally misleading.  "Whopping Two-Thirds". Yes, it says "of PIMCO's Flagship Fund".  But a reader has to parse that information in order not to be misled.

So far, ten billion of two trillion have been withdrawn, and that's from PIMCO, not just from its flagship fund.  That's one half of one percent.  Some are projecting 100 billion or possibly more.  That's five percent.  "Two-Thirds" in the headline is clickbait.

Mon, 09/29/2014 - 17:07 | 5268277 Fuku Ben
Fuku Ben's picture

Tyler's been clashing with ZH executives and site performance has been way down

He's getting desperate

Maybe he's going to be replaced too

Mon, 09/29/2014 - 17:48 | 5268404 MsCreant
MsCreant's picture

He said "May be withdrawn." 

I did not have to parse much to see that. 

It may all collapse.

It may end up Corzined.

The Fed may buy it to maintain the integrity of the financial system...

I don't feel lied to. Plus there was a question mark on the last laugh part. All good, I know I am getting into speculation when I click this one. 

Mon, 09/29/2014 - 16:35 | 5268179 Ariadne
Ariadne's picture

You dint build dat

Mon, 09/29/2014 - 17:46 | 5268397 Comte d'herblay
Comte d&#039;herblay's picture

Tylers, you all must have flies on the wall, wire taps, paid C.I's and deep throats all over the damned place to get the high quality of information you do 366/24/7 for going on 7 years now.

 

How in hell do you do it???

 

Mon, 09/29/2014 - 20:14 | 5268839 Dealyer Turdin
Dealyer Turdin's picture

A Black Swan pulls up to a stool next to a White Elephant holding a Red Herring in a Superbowl at a bar. 

"When you are done with that bowl can I buy you a drink if this stool is empty?"

The Red Herring replies, "No comrade, we do not have to wait for him to drink this, it is for me, this swimming in Vodka."

The White Elephant says, "My Stools are never empty, but this Superbowl is just a disaster waiting for me to dance with you"

The Black Swan glides on the stool and says, :Maybe I'm seeing double darling, but if you just drop your trunks in the Superbowl

I think we can find another Red Herring."

Mon, 09/29/2014 - 20:57 | 5268996 Againstthelie
Againstthelie's picture

Who withdraws billions, only because an underperforming old man is leaving? Where do the numbers come from?

This very much sounds like an advertisement article for competitors...

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