FRANKFURT May 2 Allianz shareholders
will publicly press its top executives next week to address the
underperformance of its Pimco fund management unit in the hope
that the German insurer will look more closely at management
Several top 10 shareholders told Reuters last month they
wanted Allianz to step up oversight of Pimco, which is losing
billions of dollars in outflows from its flagship bond fund
after a public falling out between its founder Bill Gross and
its co-chief investment officer Mohamed El-Erian that caused the
latter to quit.
Fund manager Union Investment, Allianz's 10th largest
shareholder according to Thomson Reuters data, told Reuters on
Friday it had decided to go public with its concerns at
Allianz's annual general meeting in Munich on Wednesday because
the insurer - Europe's biggest - still had not responded.
"The Allianz share is currently showing a clear Pimco
discount," Union fund manager Ingo Speich told Reuters.
Allianz's share price has underperformed the STOXX Europe
600 insurance index by around 4.5 percent since the
start of the year because of problems at Pimco, which makes up
the lion's share of its asset management business earnings.
Pimco contributed 3.2 billion euros ($4.44 billion) or
nearly one third of group operating profit in 2013. But its
Total Return Fund, the world's largest bond fund, saw $3.1
billion in outflows in April and over $55 billion in net
outflows since last May, data released by Morningstar showed
Allianz has forecast operating profit at its asset
management business to decline this year to between 2.5 billion
and 2.9 billion euros.
Some large Allianz shareholders want it to rethink the
management structure that was put in place at Pimco after
El-Erian's departure - the new configuration has six deputy
chief investment officers under Gross - and to scrutinize
Gross's pay, which some feel is too high. The investors also
want a detailed long-term plan on how Pimco plans to broaden its
focus beyond fixed income.
Several U.S. institutional investors, including retirement
funds, said they were monitoring the developments at Pimco and
have formally put it on "watch lists," a signal that they will
keep a much closer eye on performance than usual.
Pimco's management shakeup led Morningstar analysts to
downgrade its overall stewardship grade by one notch to a C in
March, reflecting a higher degree of uncertainty after the
departure of El-Erian and other key personnel. Morningstar
analysts also cited reports that Pimco's atmosphere has long
been characterized as a "pressure cooker" and that Gross has
demonstrated "at-times severe and reputed retaliatory
While Allianz has sought to avoid commenting so far on the
Gross-El-Erian spat, its chief executive Michael Diekmann is
well aware of shareholders' concerns over Pimco's performance
and is likely to be girding himself for tough questions on
"You can't allow it to happen too often that you're not able
to keep up with the competition," Diekmann told Allianz's annual
results news conference in February.
($1 = 0.7212 Euros)
(Editing by Sophie Walker)