Bill Gross offers PIMCO Staff a Farewell Letter from Hell

Bloomberg View columnist Barry Ritholtz published what is purported to be PIMCO founder Bill Gross’s letter to the staff as he jumped ship on the morning of September 26 to avoid being terminated for his supposed arrogant and demeaning treatment of staff. Although the letter was reported unsent on Gross’s computer, the hellishly arrogant and demeaning comments Gross makes would seem, if real, to justify his firing. 

Gross allegedly addresses his comments to “Dear Friends, Colleagues and Co-workers.” He then apparently quotes from Shakespeare’s Henry V about how hard it is to be the king of PIMCO because of the murderous Machiavellian traitors among the ranks.

Gross allegedly reminisces about how Pacific Investment Management Co. “for the past 43 years has been my home, as well as my pride and joy.” He allegedly talks about his sadness in leaving, but the “truth be told, an imminent palace coup–meant it was time for me to go.”

He allegedly offers his final Investment Outlook letter that he had written for decades as “No cats, no ‘Man in the Mirror,’ just a few thoughts for you to reflect upon as the next era–a newer new normal–begins.”  But instead of offering wisdom, he apparently brags about how “I sold the 70 percent stake” to Allianz insurance in 2000 at a valuation of $4.7 billion. “Not too shabby a track record. I daresay I must have gotten one or two things right during that period.”

Gross apparently has no compliments or even a thank-you for the input or wisdom he received from any other PIMCO employee. Instead, he purportedly complains, “The immense wealth I helped to create for my colleagues, partners and clients over all that time meant nothing,” once the traitors began their “standard sequence of events for all insurrections” that included “public character assassination, the quiet intimations that I had lost it” with erratic behavior, dark glasses during presentations and conversations with his cat named Bob. 

He apparently blames the insurrection on PIMCO employee jealousy and greed, because “Many of you seemed to resent my annual compensation. Gross allegedly sneers, “you believed that a few hundred million dollars would be better placed in your collective hands.”

The most sobering comment from Gross is his apparent acknowledgement that natural eccentricities and idiosyncrasies regarding the way he treated PIMCO staff “have been on display for decades, and were never looked on askance. At least, not while the alpha was piling up and the assets under management were rolling in.” He adds, “Was I so different from any other California billionaire? The TM and yoga, the occasional head stand, a well-deserved bark at a wayward underling–these and all manner of behavior that no one ever thought about before suddenly took on all sorts of dark implications.”

But as the king was heading out the door, Gross’ apparent farewell letter warns the BSDs (big-swinging-d#@ks) that expect to be taking over his PIMCO castle and compensation for themselves a warning that the firm’s perceived “alpha” (manager performance) may have been due “to be nothing more than ‘leverage-enhanced’ beta.”  

The timing of this comment seems ominous, given that the Wall Street Journal reported on September 24 that the U.S. Securities & Exchange Commission is “investigating whether bond giant Pimco artificially boosted the returns of a popular fund aimed at small investors.”  According to the article, the SEC Enforcement Division’s investigation includes the way Pimco Total Return Bond ETF, managed by Mr. Gross, “purchased and valued certain bonds.” Investigators from the SEC’s Enforcement Division are examining whether $3.6 billion of illiquid investments were bought at discounted prices, but reported at “higher valuations.” 

Such improper accounting for a fund’s investment performance is a violation of securities law, “even if the wrong information was supplied unintentionally.”

A spokesman for Pimco told the Journal that they have “been cooperating with the SEC in this nonpublic matter, and we take our regulatory obligations and responsibilities to our clients very seriously. We believe our pricing procedures are entirely appropriate and in keeping with industry best practices.”

Bill Gross was PIMCO’s rainmaker and his reputation for producing superior investment returns was key attribute in growing the firm from $13 million in assets under management to almost $2 trillion. But as Gross moved on, his apparent final comments to employees were: “She’s your baby now. Try not to screw it up too badly.”