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Pimco trustee assails exec's salary

Criticism of bond guru Bill Gross, who is said to earn $200 million annually, intensifies.

March 11, 2014|By Scott Reckard
  • Bill Gross, co-founder and chief investment officer for Pacific Investment Management Co.
Bill Gross, co-founder and chief investment officer…

A longtime trustee for Newport Beach's $1.9-trillion Pimco funds lashed out at the reported $200-million annual salary of Bill Gross, the billionaire bond guru who co-founded the giant money manager in 1971 and remains its chief investment officer.

"You could hire 2,000 schoolteachers for that money," said William J. Popejoy, a former financial executive who has been a Pacific Investment Management Co. trustee for 23 years. "I don't know what Bill should be paid, but $200 million is not appropriate."

The remarks, in an interview with The Times, are the latest challenge to Gross, 69, whose reputation as the world's savviest bond investor was tarnished recently by disappointing results at Pimco's core investment vehicle, the Total Return Fund, which Gross personally manages.

The Total Return Fund, with $237 billion in assets, had previously outperformed comparable bond funds for many years, prompting Morningstar Inc. to name Gross the fixed-income manager of the decade in 2010.

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But the fund did so poorly in 2011 that Gross apologized to investors. Last year it lost 1.92%, trailing more than 70% of its peers in its worst annual performance since 1994.

At a time when all fixed-income funds have been suffering, Pimco has seen its investors, mainly institutions such as pension funds, pull back on their investments. Its total assets dropped below $2 trillion in the fourth quarter of last year, to $1.91 trillion as of Dec. 31.

The company was shaken in January by the abrupt departure of its chief executive, Mohamed A. El-Erian, Gross' heir apparent, who had held the title of co-chief investment officer with Gross.

That crack in Pimco's formidable facade deepened last month when the Wall Street Journal painted an ugly portrait of Gross' management style, including takes of him publicly dressing down key employees and discouraging them from speaking to him or making eye contact.

The article said he and El-Erian had clashed in front of more than a dozen colleagues, with El-Erian complaining he had to clean up messes created by Gross. Gross, in turn, belittled El-Erian and compared himself to Secretariat, the Triple Crown thoroughbred racehorse.

"I don't know if Secretariat made $200 million a year," Popejoy said.

He described Gross' recent performance as "mediocre" and characterized the description of his management style as "bullying, if what I read is true."

Popejoy emphasized that he was not speaking on behalf of the other trustees.

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