Wholesalers make hay with Pimco

When Janus Capital Group Inc. announced it was hiring Bill Gross, Matt Cody knew he had to get to work. Fast.

Mr. Cody, a senior fixed-income analyst at financial advisory firm Wetherby Asset Management, knew he’d face a barrage of calls from colleagues dealing with anxious, confused and curious clients. And he needed to have answers. So he sprinted to the office.

But some of the most persistent callers and emailers he dealt with when he got to work that day — and in the days since — were wholesalers trying to sell him funds.

“I couldn’t even count how many emails and phone calls there were over those few days,” Mr. Cody said.

The difficult and hectic morning for financial advisers, brokers and Pimco executives represented the greatest business opportunity ever for some fund sellers, who rushed to capture the billions set in motion by what Janus chief executive Richard Weil called “the press release heard around the world.”

UNEXPECTED OPPORTUNITY

“Just because of the sheer size of Pimco and how big it was, this will probably go down as one of the biggest fund liquidations of all time,” said Mark Kamies, president of third-party fund wholesaler Multi-Funds Inc. “That money has to land somewhere, and as long as they keep bleeding, everybody’s trying to get their share of it.”

The Sept. 26 departure of Mr. Gross — then Pacific Investment Management Co.’s chief investment officer and the manager of its largest fund, Pimco Total Return (PTTAX) — created an unexpected sales opportunity for bond fund managers.

And the people charged with selling those funds, who can make bonuses of up to half of 1% on the millions they bring in, are in some cases earning the kind of money that can change lives.

“People will be able to retire off the money they’ve made since Bill Gross left,” Mr. Cody said.

A wholesaler for one of Pimco’s main competitors described living out of a suitcase making pitches to advisers in his territory who still have money pulled from Pimco parked in cash or other temporary vehicles.

“There are still minds to be made up,” the wholesaler said. “I’m leaving my house on Sunday evenings. I’m coming home on Friday nights. It’s starting as early as possible and going as late as possible.”

The salesman, who declined to be identified because he is not authorized to speak for his firm, said he is struggling to keep up with the demands of advisers.

“Everybody needs something. Trying to marshal the resources is the biggest challenge. Everybody wants to talk to the portfolio manager,” he said. “If everyone’s talking to the portfolio manager, he or she isn’t managing money.”

But wholesalers also face the scarred and more skeptical clientele of advisers, whose expectations have been diminished by both the specter of rising interest rates as well as the unpleasant experience of investing with — and then unexpectedly losing — a star fund manager.

Mr. Cody’s firm pulled about $200 million from Pimco Total Return shortly after Mr. Gross’ departure.

The firm sent most of its former Pimco business to the MetWest Total Return Bond Fund (MWTIX), managed by a subsidiary of the TCW Group Inc. and distributed by Foreside Funds Distributors. They also sent some funds to the Vanguard Group Inc. and Standish Mellon Asset Management Co., a unit of the Bank of New York Mellon Corp.

APPROACHES VARY

Pimco said PTTAX lost $23.5 billion in September and $27.5 billion in October. After peaking at $293 billion in 2013, the fund had $171 billion in assets as of Oct. 31.

Advisers say the sales ap-proaches of fund sellers vary widely, from the admittedly more urgent pitches they heard from wholesalers they trust to the “ambulance chasers” who emailed shortly after Mr. Gross left and asked, not so coyly, if they’d heard about a competing fund.

Some advisers — not swayed by the hard sell — are still deciding what to do with the money they pulled out of Pimco.

Brian W. Katz, chief investment officer for The Colony Group, said that despite the continuous bombardment of fund sellers, he’s relying primarily on his firm’s research and the help of an independent consultant in choosing how to replace Pimco, whose fund he dumped the day Mr. Gross left.

His clients’ fixed-income allocations are parked in the iShares Barclays Aggregate Bond Fund (AGG), an index tracker from the BlackRock Inc. unit.

“We like to think of ourselves as independent,” Mr. Katz said. “Wholesalers are useful in bringing in opportunities and [letting you know] if things you may not have been aware of are going on at a fund company.”