Market Overview

PIMCO's Gross Mistake

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PIMCO was amateurishly slow in responding to the departure Friday morning of CEO and founder Bill Gross. Despite his threats to quit and the company’s reported plan to fire him, PIMCO appeared to have no plan in place to tell the world about the exit of its legendary bond manager.
It took the company an hour to develop a statement confirming the departure and committing to the announcement of a successor by day’s end. At midafternoon, the company website still featured Gross and his analysis on the homepage. 
 
What are the basic crisis protocols that would have made PIMCO look like a company that knows how to manage risk and make the best of an unexpected downturn?
 
1) Make PIMCO the most reliable news source.
 
Investors are going to be searching the internet for information on what has happened at PIMCO and what they can expect to happen next. By putting a statement on the firm’s website and using their digital presence as a key communication tool, PIMCO can control the story their investors hear much more easily. Rather than using Google or Yahoo to find a third party version of events, investors should be able to get an official report directly from PIMCO. 
The website is also a key location to offer support services to investors who may have already been nervous about leaving their money in PIMCO’s care. A call to action inviting investors to contact their advisors, read the firm’s FAQ’s on the situation, or call their hotline for more information would go a long way toward making investors feel secure.
 
2) Inform employees.
 
Investors probably aren’t the only ones feeling insecure about their futures right now—employees and their families have had a major shock, too. PIMCO should prioritize communicating with their employee family, and offer them as much information as possible about what they can expect. This should be done, of course, with the knowledge that any information passed to employees will soon be leaked to the media, and should be vetted as a press release. 
 
3) Communicate with key stakeholders.
 
Official conference calls or webinars with advisors and institutions should be arranged to outline what steps PIMCO will be taking in the next weeks to protect assets while transitioning to new leadership. Again, these people will likely be contacted by the media and any information passed to them will be public long before PIMCO addressed the media directly. With that in mind, official communications with advisors and other industry professionals should be loaded with key messages to help steer what the media is hearing from all sources.
 
4) Work with the media.
 
Finally, PIMCO should be proactively reaching out to the media, keeping journalists informed and reinforcing the messages that Douglas Hodge, PIMCO’s chief executive, began distributing this morning: they are grateful for Bill Gross’ contribution to the firm, but have been aware of a rift within the management and are looking forward to restoring investor confidence.
 
By the way, these shortcomings were probably not the failing of the PR team.  Large corporations that have left themselves unprepared are physiologically incapable of moving quickly and efficiently
 
Bill Gross’ resignation this morning is the second staffing blow to the enviable PIMCO brand in 2014.  Former PIMCO CEO Mohamed El-Erian stepped down at the beginning of the year to spend more time with his daughter; now Gross, who founded the company, has left to manage the new unconstrained bond fund at Janus Capital. These departures are perhaps the culmination of the painfully public dispute between El-Erian and Gross, which has frightened investors and led to more than $4 billion in redemptions in June alone.
 
Both the New York Times and Wall Street Journal, along with countless other publications, have published pieces today effusing on recent behind-the-scenes action at PIMCO. Internal conflicts over the firm’s business strategy, as well as Gross’ volatile public persona of late—he delivered an address at the Morningstar Investment Conference in sunglasses, referring to himself as “a 70 year-old Justin Bieber,” and wrote a monthly investor newsletter dedicated to the memory of his late cat—had made Gross’ departure from PIMCO likely. Anonymous sources told the New York Times that “a decision had been made…for Bill Gross to leave or be forced out.” 
 
Even with that decision in place, though, it appears Gross may have caught PIMCO off-guard this morning by announcing his resignation simultaneously with Janus’ announcement of his new position. Janus publicly announced that Gross was joining their team around 8:30 am EST this morning and all early media stories surrounding the event focused on Janus. No comment from PIMCO was made until their press release at 9:37 am EST—a full hour after the story broke. One would imagine then, that PIMCO was just as surprised to hear about the departure of their CEO and founder as the rest of the world.

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

 

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