I felt the need to point out this particularly ridiculous post because unlike the journalists that are normally recognized as complete hacks that do not understand what they are writing about (Louise Story, Gretchen Morgenson, Matt Taibbi, David Weidner etc) Felix usually does at least have some conceptual framework, however misguided, about the topic he is addressing.
Not today. He decided to just unleash a storm of bullshit on some possible pay figures at PIMCO. Let’s just go down the list.
“Gross, who’s already a multibillionaire and really doesn’t need the money, would have had to be utterly tone-deaf to pay himself $200 million in 2011”
First and most obviously, Gross doesn’t pay himself so that’s silly. Gross gets paid by the parent company that bought his firm and they are paid based on their firm’s overall profit. As Felix recognizes elsewhere in this post non leveraged buy sides get paid based on management fees on their AUM not performance. Gross had a bad year performance wise but brought a few hundred billion in the front door so he gets paid for that. Tone deaf to whom? He gets paid based on the performance of his unit and they did well. He doesn’t have to answer to congress or a goofball parade of Occupy Wall Streeters.
He continues with “It’s hard to see how he could justify extracting $200 million from Pimco’s investors or three times the record $68.5 million that Lloyd Blankfein was paid in 200”
This sentence is a total nightmare. Justify extracting from PIMCO’s investors? They have one investor Allianz SE the firm that owns them entirely and also chooses his pay package. So his increase in AUM certainly justified the pay package to them no matter what the number is. If he is talking about investors in PIMCO’s funds then they all pay an agreed upon and transparent management fee up front. Nothing gets extracted, but asset managers don’t go around refunding those fees if they have a year of underperformance. Then you have the “record” set by Lloyd Blankfein. A record of what exactly? The most a CEO at a publicly traded investment bank made in a particular year? Shocker: Bill Gross isn’t the CEO of an investment bank. At Goldman over the past decade star traders like Pierre-Henri Flamand and Morgan Sze made multiples of what Blankfein did and comparable figures to Gross’s rumored number. That is entirely an apples to oranges comparison though because buy siders that actually run portfolios north of 200 billion are paid at this level (or far better if you’re running even a tenth of that size at a leveraged shop)
Next in line “El-Erian was having a hard enough time on the liquidity-management front when he was in the office every day”
This isn’t true and I’m sure that Felix knows it. Larry Summers forced HMC to invest Harvard’s operating cash flow along with the endowment. Both El-Erian and Meyer before him made it abundantly clear that investing money that would be used in a 1-3 year time frame was inappropriate to piggyback an endowment that had embraced the longest possible investment timeframe in order to exploit some illiquidity premium. This is not El-Erian having a hard time with anything; it’s just him explaining to school officials that their allocation was innapropirate. This allocation was made by Harvard officials not by Harvard Management.
“How much time does El-Erian spend appearing on television, writing op-eds, and otherwise cultivating the media? Is that all part of some Pimco marketing push? To what degree does it distract from his day job?”
Answers: A lot of time. Yes. None, bringing in assets is his day job, this is part of that.
Next “Finally, and most interestingly, how did Larry Fink manage to amass twice Pimco’s assets under management despite the fact that Bill Gross, the greatest bond investor of all time, had a more than 15-year headstart on him?”
He bought Barclays Global Investors which at the time was the largest asset manager in the world from a bank that wanted to recapitalize. That’s a good way to get there. Larry Fink decided that passive management though a lower margin game was worth being in for it’s scale and stability.
“What is the story of Blackrock vs Pimco, and how is it likely to play out in future?”
There’s no fucking story.
“In order for Pimco to effectively compete with Blackrock, will it too have to go public?”
No. How is that even a question? They are a wholly owned subsidiary of a firm that is significantly larger than Blackrock which allows them tremendously cheap financing if they need it. Allianz’s insurance assets also provides them with 23% of their AUM. Does JP Morgan Asset Management, SSgA, or Deutsche Bank Asset Management (all well over a trillion in AUM) need to spin off and IPO to compete with Blackrock?
An astounding amount of clown questions bro.