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Bill Gross: new PIMCO structure a 'significant improvement'

Bill Gross: new PIMCO structure a 'significant improvement'

PIMCO founder and CIO Bill Gross has said the six recently promoted deputy CIOs have made a 'significant improvement' to the firm's operating structure.

The deputy CIOs were unveiled at the end of January shortly after Gross's co-CIO Mohamed El-Erian announced he was to leave the firm.

Gross said the new deputy CIOs, made up of Newport Beach-based Mihir Worah, Mark Kiesel, Dan Ivascyn and Scott Mather, along with London-based Virginie Maisonneuve and Andrew Balls, would each head up an individual channel of assets and have responsibility for trading desks and specialist areas within their sector.

All six will report directly to Gross and while Balls and Mather were already on the firm's investment committee (IC), Ivascyn, Worah and Kiesel will now also step up to take part in the daily meetings, with Gross saying the idea was for the CIOs to 'apply the views of the IC and tailor them to their respective areas.'

Gross said that Maisonneuve 'would provide frequent input contributing to our debates and views of equity markets' but added that her primary focus would be on leading the equity platform and chairing the Equity Portfolio Committee.

New approach

Along with Gross and the deputy CIOs, the remainder of the IC is made up of monetary policy specialist Tony Crescenzi, Saumil Parikh, who looks after PIMCO's near to mid-term outlook for global markets and economies, and Christian Stracke who heads up PIMCO's global credit group.

Gross said: 'We believe this new format, and the idea sharing it will facilitate, will be more responsive to market developments.'

He added: 'We have substantial resources on each team to address the daily functions of the desks, so this structure will not materially change the amount of time the deputy CIOs spend generating investment ideas for our client portfolios.'

Macro matters

Turning to the macro backdrop, Gross said that despite the beginning of tapering, markets remained 'financially repressed', which would lead to investors taking excessive risk in pursuit of returns.

Despite his view that ongoing high levels of leverage in the financial system and slowing credit growth would continue to create volatility for equities and emerging markets, Gross reiterated his renewed optimism for bond markets in 2014.

'The outlook for the bond market is much better than in 2013. Interest rates have adjusted upward and now reflect better value. We think 10-year Treasuries at 2.6% are attractive.'

'We continue to favor roll-down opportunities at the front end of the yield curve – four- and five-year Treasuries – which will be anchored by the Fed’s zero-bound policy rate for the next few years. On the equity side, we prefer stocks that return cash to shareholders in the form of dividends or buybacks.'

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