Pimco abandons effort to become a big equities player

Pimco, one of the world's biggest bond houses, is abandoning its attempt to become a major player in equities, in another setback for the California-based asset manager.

Virginie Maisonneuve, the company's chief investment officer for equities, is the main casualty of the strategic shift. She is stepping down after less than two years in her new role, said two people familiar with the company.

She was poached from Schroders in London with a mandate to hire new equity portfolio managers and crack the equity market.

The announcement on Thursday is the culmination of a fractious multiyear debate inside Pimco about how much it should spend on equities amid a disappointing response from clients.

Pimco's leadership fell into turmoil last year culminating in the September departure of co-founder Bill Gross. The group has been struggling with a damaging run of outflows and investors are worried about its future.

"The exit of Bill has been a big factor in curbing Pimco's hopes of developing its equity business," said one of the people.

The company is retrenching to focus on hedge fund-like equity strategies and bond and equity hybrid products it has developed with outside partners. Ms Maisonneuve will oversee the liquidation of Pimco's other equities funds before departing the company.

This is the second time in five years that Pimco has unsuccessfully moved hard into equities. It briefly hired Neel Kashkari, architect of the US Treasury's Wall Street bailout package in 2008, to run its nascent equities division, before appointing Ms Maisonneuve in October 2013.

"Equities will continue to be an important part of Pimco's investment solutions, including active and enhanced equities which total more than $50bn in assets under management," chief executive Douglas Hodge said in a statement.

"We are evolving our approach to focus on areas that are more fully aligned with our capabilities and clients' needs, by continuing to manage our successful dividend and long/short strategies, as well as expanding our enhanced equities strategies including those in collaboration with Research Affiliates," Mr Hodge said.

Ms Maisonneuve was earmarked to oversee the changes, but "in light of these changes she has decided to leave the firm after a transition period," Mr Hodge said.

The future of the equities business inside Pimco had been one of several areas of contention inside the company between Mr Gross and other executives. He walked out to join a smaller rival, Janus Capital, last September.

Since then, the group's Total Return Fund has lost its title as the world's largest bond mutual fund as another month of withdrawals in April saw assets slip to $110.4bn compared with $117.3bn in the Vanguard Total Bond Market Index Fund.

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