Outside clients continue to pour money into Pimco, using the bond manager to add fixed-income holdings. The firm took in €31.7 billion ($36.5 billion) in net third-party money during the second quarter, and July brought a further "low double-digit amount," Claire-Marie Coste-Lepoutre, CFO of parent Allianz SE, said in an interview. Most of the new money Pimco attracted in the April-June period landed in bond strategies, with multi-assets and alternatives also contributing, Allianz said Friday as it announced record earnings. Pimco saw "marginal" outflows from equities, the company said.
Pimco was co-founded by Bill Gross and became known in the 1980s for introducing the total-return approach to fixed-income investing, a strategy that reshaped how bonds are traded. Millions of Americans keep Pimco funds in their retirement portfolios. When Gross left in 2014 after clashing with other executives, client withdrawals reached tens of billions before the situation settled down.
Since Allianz bought Pimco in 2000 for $4.7 billion, the bond manager has been the most prized part of its investment arm. Last month, though, Allianz's decision to purchase the minority shareholders' stakes prompted at least one analyst to question whether it was positioning the asset-management unit for a possible sale. That's "absolute speculation," Coste-Lepoutre said.
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"We like very much the asset management business," she said. "We like very much the performance of Pimco. So obviously, we wanted to have more of that."
By consolidating ownership, the arrangement makes the subsidiary's structure simpler and gives Allianz a larger cut of Pimco's earnings. The asset-management division, responsible for roughly one-fifth of Allianz's operating profit, turned in the strongest performance of the company's three segments. Its operating earnings rose almost 20%, outpacing the 10% gain in life and health insurance and the 7.2% increase in property and casualty insurance, according to company filings.
Allianz's other money manager, Allianz Global Investors, brought in €7.6 billion of client money. In total, third-party assets under management reached an all-time high of €2.16 trillion. The latest inflows build on a recovery that began after Gross's departure, and they reinforce Allianz's confidence in the asset-management division even as other insurance segments grow more slowly. For Allianz, the Pimco buyout also removes the need to manage outside ownership in a business that has become central to its overall strategy.
"For us, it is very important that we keep developing this nicely-balanced portfolio across our three segments," said Coste-Lepoutre.
Starting in 2027, the minority purchase will produce a "triple-digits net income benefit at a very low level of risk because we know that business very well," Coste-Lepoutre said.
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