Bloomberg News

Allianz Gives Pimco More Independence in Fund Unit Revamp

September 06, 2011

(Updates with comment from Allianz starting in fourth paragraph.)

Sept. 6 (Bloomberg) -- Allianz SE, Europe’s biggest insurer, said Bill Gross’s Pacific Investment Management Co. will take over the global distribution of Pimco products as part of a reorganization of the asset management business.

Pimco, the insurer’s largest fund manager, and Allianz Global Investors will be combined under a new holding company, Allianz Asset Management, effective Jan. 1, the Munich-based insurer said in a statement today. The new group will be headed by Allianz management board member Jay Ralph.

The move gives Pimco, which has increased assets more than sixfold to $1.3 trillion since Allianz acquired the Newport Beach, California-based firm in 2000, more independence from its corporate parent as it expands into equities. Gross and Mohamed El-Erian will continue to lead the firm.

“We’re shifting away from a family of boutiques to a two- pillar structure,” Hanno Strube, an Allianz spokesman, said today in an interview. The reorganization “does not prepare for any IPO or spinoff” of either brand, he said.

Pimco oversaw two-thirds of Allianz’s 1.5 trillion euros ($2.08 trillion) in assets under management as of June 30, a figure that includes funds managed for outside clients as well as Allianz’s own money. The California firm accounts for the vast majority of the fixed-income assets managed for third-party clients at Allianz. Fixed income accounted for 87 percent of the money that Allianz runs for external investors, according to an Aug. 5 presentation on Allianz’s Web site.

Pimco’s Growth

“The last eight or nine years have witnessed tremendous organic growth in the business, driven in particular by the extraordinary success of Pimco in that period,” Allianz said in today’s statement.

Allianz Global Investors will be headed by Elizabeth Corley as chief executive officer and Andreas Utermann as chief investment officer, Allianz said. The Allianz Global Investors unit includes RCM Capital Management and former asset-management units of Dresdner Bank and Commerzbank AG.

Allianz’s combined asset-management businesses reported a 2.3 percent gain in second-quarter operating profit to 528 million euros ($744 million) last month. The unit had net deposits of 21.1 billion euros in the quarter, compared with 22.6 billion euros a year earlier. Fixed-income deposits were 18 billion euros during the three months ended June 30.

Paris-based Axa SA, Europe’s second-biggest insurer, reported 23 billion euros in investor redemptions at its asset- management units in the first half, mostly from institutional clients withdrawing funds at New York-based AllianceBernstein.

U.S. Distribution

Gross manages the $245 billion Pimco Total Return Fund, the world’s biggest mutual fund. His firm last year started its own distribution in the U.S., a move that “has enabled Allianz Global Investors and Pimco to deliver better defined offerings directly to clients,” Allianz said.

Pimco, co-founded by Gross in 1971, had $200 billion in assets when it was acquired by Allianz more than a decade ago. Pimco has maintained some autonomy since the takeover by Allianz, relying on its own investment and executive committees to control investment guidelines, expansion plans and executive hires.

Synonymous with bonds for nearly four decades, Pimco in December 2009 hired Neel Kashkari, a former U.S. Treasury official, to direct its expansion into equities.

Allianz, led by CEO Michael Diekmann, last month reiterated its full-year operating profit forecast of 7.5 billion euros to 8.5 billion euros.

--With assistance from Rajiv Sekhri in Frankfurt. Editors: Christian Baumgaertel, Josh Friedman

To contact the reporters on this story: Oliver Suess in Frankfurt at osuess@bloomberg.net; Sree Vidya Bhaktavatsalam in Boston at sbhaktavatsa@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net; Frank Connelly at fconnelly@bloomberg.net


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