Allianz Asset Management Hit by PIMCO Outflows, Although Reversal Expected

Article

Allianz Asset Management reported a 17 percent decline in first-quarter earnings as investors continued to withdraw money from its Pacific Investment Management Co. unit 19 months after the ouster of Chief Investment Officer Bill Gross.

Operating profit at Allianz Asset Management, part of Munich-based insurer Allianz SE, fell to 463 million euros ($527 million) from 555 million euros [($632 million] a year earlier, according to a statement on Wednesday. Third-party assets under management fell by 34 billion euros [$39 billion] to 1.24 trillion euros [$1.4 trillion] during the quarter. The unit also includes Allianz Global Investors.

PIMCO’s outflows continued, though at a slower pace, Allianz Chief Financial Officer Dieter Wemmer said in the statement. “Although we anticipate a challenging environment for the asset management industry, we continue to expect positive net flows at PIMCO in the second half of the year.”

PIMCO, the Newport Beach-based company that Allianz acquired in 2000, is trying to reverse redemptions that have reduced its assets under management to $1.5 trillion from a peak of $2 trillion in 2013. Outflows have peaked following Gross’s departure.

Growing Competition

As a manager focused on fixed-income assets, PIMCO is struggling to attract clients as interest rates remain at low levels. It also faces growing competition from passively run funds with lower fees.

PIMCO’s cost-income ratio worsened to 64.1 percent in the first quarter from 62.5 percent a year earlier as reduced operating expenses failed to compensate for lower operating revenues, Allianz said. Higher performance fees are expected to support the ratio in the second half of the year, the company said.

As part of a plan to cut costs, Newport Beach, California-based PIMCO reduced the number of investment professionals by about 7 percent last year to 720 people globally while cutting total staff by roughly 5 percent to 2,300 people. Allianz expects PIMCO to reverse redemptions this year and reduce expenses further as the business stabilizes, the company said in February.

In an unscheduled report last week, Allianz said that net income for the whole company gained 21 percent to 2.2 billion euros in the first quarter, beating analysts’ estimates. Earnings were helped by gains from selling investments.

Allianz has lost 13 percent in Frankfurt trading this year, while the Bloomberg Europe 500 Insurance Index has lost 15 percent.