As participants, and sometimes chairs of their companies’ 401K investment committees, treasurers faced a tough choice late last year when PIMCO founder Bill Gross left to join rival Janus. Initially the move caused a large outflow of money from PIMCO’s flagship total return fund.
When the PIMCO crisis first hit, treasurers faced a tough dilemma: Should they advise their plans to pull out of the fund, or retain their holdings? In conversations with treasurers at cash rich companies, it became clear that opinions on how to react were split. Many treasurers reviewed the investment during the November-December period when the big withdrawals took place. “We created a side-by-side investment option and allowed employees to make the decision to pull out or not,” one treasurer said. “As a result some of the employees’ funds are still in the PIMCO Total return fund. We were worried about pulling out when everyone was pulling out and incurring a loss. Even with Bill Gross gone, PIMCO hasn’t changed. The team is still there and it continued to outperform other funds.”
Other treasurers took a different tack. One treasurer recommended that the company pull out of PIMCO altogether. “We went through the same analysis,” added another treasurer. “We ended up removing it and replacing it with three new funds.”
“The key,” according to the assistant treasurer at a tech firm, “is to document whatever decision you make. Very few decisions are black and white. You have to make sure you have the documentation to back up whatever decision you ended up making.”
Now, PIMCO announced it has hired former Federal Reserve Chairman Ben Bernanke as a senior adviser to provide expertise on the economy and the Fed as well as guidance on PIMCO’s investment process and Fed policy.
Will the Bernanke hiring change treasurers’ minds about PIMCO? That remains to be seen.