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AK In The News: Industry Split On Greater Allianz Scrutiny Of Pimco

I was asked to comment on an article in today’s Ignites (A Financial Times Service) about the industry’s reaction to reports that Allianz, the parent of Pimco, is going to increase its oversight and be more hands on with the subsidiary because of the continuing bad publicity the firm is getting in the wake of Mohammed El-Erian’s resignation in January. El-Erian was the heir apparent to CEO Bill Gross, and his departure has raised questions about the culture of the firm, among other things.

The article detailed results of a reader poll in which 43% of participants said that increased oversight would hurt Pimco (26% of these respondents felt that the negative effects would be significant). 38% of respondents believed that increased oversight would benefit the firm. 20% said such action would have no impact.

Parent companies in the asset management business traditionally give their subsidiaries large amounts of autonomy. In fact, Allianz increased Pimco’s autonomy in January 2012 when it gave Pimco control of its worldwide distribution. The overall fear is that micro-management of subsidies, in an industry where people are so important, could potentially lead to mass defections.

My belief is that if Allianz does become publicly involved, it is more of a way to shore-up public confidence in Pimco then to actually get in there and make significant changes. Perception is reality, and the perception in the industry today is that Pimco is broken. If Allianz can help shore-up confidence, and get the firm out of the media spotlight, perhaps it can help the firm turnaround.

To quote from the article: “Overall, the perception of damage has already taken its toll on Pimco, experts say. Andy Klausner, founder of strategic consultancy AK Advisory Partners, expects any Allianz involvement in fixing Pimco to be enacted more for public relations reasons than any other purpose, particularly due to doubts that Allianz has the appetite to restructure Pimco’s culture. With immense media coverage of Pimco recently, the real issue is that the firm’s reputation has suffered, he says. “Whether Pimco is right or wrong in the debate about their future, it does not matter,” Klausner says. “The perception of their culture being broken is important to note and it cannot be ignored.””

What do you think?

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