The abrupt departure of Mohamed El-Erian as CEO of bond-fund megalith Pimco this week sparked much head-scratching amongst the financial press. Bill Gross, Pimco’s founder and managing director, told the Wall Street Journal that he didn’t want El-Erian to leave (paywall), but the Financial Times reports that a “frequently fractious” relationship (paywall) between Gross and El-Erian was part of the reason he departed.
So what’s it really like to work for the bond king?
Interviews with ex-Pimco traders suggest Gross, who served as a naval officer during the Vietnam war, runs an incredibly tight ship. And his management style can take its toll.
Traders arrive at the third-floor trading room of Pimco’s headquarters in Newport Beach, California, about an hour’s drive from central Los Angeles, before 5 am California time. (Early this year the firm is expected to move into a new 20-story headquarters in the same town.) Visitors—especially those who’ve visited the voluble trading desks of Wall Street before—notice something about the floor: the silence.
You can almost hear a pin drop. And that’s by design. Under Gross, conversation is kept to a minimum. If you must talk, it’s done in tones not much louder than a whisper.
“Everyone knows when the big dog walks in, he wants silence,” one former Pimco employee, who declined to be named, told Quartz.
Almost as soon as Gross is seated, he requires updates from all corners of the markets, which traders zap to him.
You certainly don’t talk to Gross himself.
“It’s kind of medieval. You only speak when spoken to,” the same trader said.
All communications about trade ideas for Gross are submitted according to his protocol. The trades are printed out, with charts, yields and prices. They’re handed to Gross’s assistant. She takes the recommendations and walks a few feet to put them in Gross’s in-tray, on his desk. Traders aren’t supposed to put the recommendations in the in-tray directly.
If his protocols aren’t followed, Gross has been known to issue somewhat random “demerits.” (Perhaps it’s some sort of throwback to his time in the Navy.) Traders’ recommendations reviewed by Quartz had hand-written queries and criticisms on them from Gross, with running tallies of the number of infractions (“Demerit #3”) added at the top.
Sometimes Gross’s attention to detail goes to extremes. As one story goes, confirmed by separate sources, Gross once sent a corporate bond trader home in the midst of the trading day with instructions to hand-write 1,000 times that he would not submit trade recommendations without charts.
Was it Gross’s managerial style that finally exhausted El-Erian? We don’t know. Traders say that while the two were publicly viewed as equals—in addition to their other titles, they are both called “co-chief investment officer”—within the firm Gross was clearly considered superior.
“There wasn’t a co-anything. Everybody knew that Bill ran it,” said another ex-Pimco employee, who declined to be named. “I was in investment committee meetings where he would just tear Mohamed apart.”
Of course, Gross has no trouble finding high-powered employees willing to work at Pimco. He built the firm into one of the world’s most influential asset managers with his laser-like focus on the unsexy world of bond markets. Pimco’s “Total Return Fund” is the world’s largest bond fund. And traders don’t join trading desks because they want to work in a cushy environment. They follow the money, and Pimco pays well. (El-Erian reportedly earned $100 million in one of his years at the firm.)
And in fairness to Gross, traders acknowledge there’s a method to his approach. He is making a myriad decisions on titanic sums of client money. Though they might ruffle feathers, employees say his systems work, allowing him to quickly and accurately distill detailed information into fuel for investment decisions.
“His ability to scan and assess information is staggering,” said one former Pimco employee.
But El-Erian was also the long-standing heir apparent to Gross. Now Pimco’s investors will be asking what will happen to the firm should anything happen to Gross. He’s publicly claimed he’s “ready to go another 40 years,” though he subsequently told the Journal that five or ten years would be more realistic. When you’re searching for someone to assume the mantle at a company that’s the leader in its field, that’s not necessarily a whole lot of time.