Orange County Employees Retirement System dumps Pimco

One of the earliest investors in Pimco's $117bn Total Return fund has withdrawn the bulk of its money following last year's acrimonious departure of investment chief Bill Gross.

The Orange County Employees Retirement System, situated just 12 miles from Pimco's headquarters in California, has voted to pull the majority of its investment, about $200m, from the flagship bond fund.

The $11.5bn pension scheme has invested in the Total Return strategy, managed by Mr Gross until his dramatic exit from the company in September, since 1982, five years before it became available to the mass market.

Ocers first debated looking for an alternative bond fund manager a year ago as investor concern about performance issues at Pimco intensified amid reports of management infighting. It called off the search in June, which at the time was hailed as a significant "endorsement" for the world's biggest bond fund manager.

However, Ocers put the fund under review in November "as a result of personnel and organisational changes" after Mr Gross's departure to Janus Capital.

It has now picked rival Californian house Dodge & Cox to manage the $200m. A further $100m in the Total Return fund is still under review.

Amin Rajan, chief executive of Create Research, the consultancy, said the loss of Ocers' endorsement could spell "severe" reputational damage for Pimco.

"The latest decision by Orange County makes it hard to know whether Pimco has finally drawn a line under the whole saga and moved on. When a longstanding client like that [loses confidence], you begin to wonder," he said.

Pimco declined to comment. The asset manager said earlier this month that the Total Return fund shed another $7.3bn of assets in March, taking the total lost since Mr Gross left to more than $100bn from that fund alone.

Mr Rajan added: "Pimco still remains a formidable investment engine, but that faith can be chipped away easily if other big names head for the exit."

Jake Moeller, head of UK research at Lipper, the data provider, said that further institutional mandate losses for Pimco are probable.

"[The Ocers withdrawal] does not sound good certainly, but the reality now is institutional investors will tidy up small mandates and seek to spread assets over a wider base of fund managers to diversify. There are so many fixed income managers available now that Pimco will not have the monopoly it once had," he said.

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