The High School Breakup

We all did it, and we all had it done to us: dump someone—and deny that we did it because they were soon going to dump us.

Bill Gross and the company he founded, PIMCO, pulled the asset management equivalent of this on Friday, September 26. Shortly before 9:00 AM EDT, the news hit the wires: Bill Gross was leaving for Janus. Mass incredulity followed. Was this a joke? Had someone hacked a prominent Twitter feed, hoping to arbitrage the “news”? As it turned out, it wasn’t a hoax—it was the beginning of what will be remembered as one of the ugliest breakups in asset management history.

Within minutes of the news breaking, the spin began. Everyone seemed to have a source within PIMCO, and all these sources seemed to be saying the same thing: Gross jumped before he could be pushed, and the pushing was to be done later that afternoon. This was, to this industry observer’s eyes, a harkening back to much earlier years. “Yeah, she broke up with me at lunch—but only because she knew I was going to break up with her at dinner.”

Of course, unlike teenage breakups, this one had major ramifications for certain shareholders. On the announcement of the news, Janus’ stock soared upward of 40%, creating $800 million in value. PIMCO parent company Allianz correspondingly saw its shares fall more than 5%—a drop that destroyed nearly $5 billion in value. The price of treasuries, a large amount of which PIMCO’s Total Return Fund holds, also fluctuated wildly. And only time will tell what market flows will do: Commentators expect PIMCO to suffer, and Janus to benefit, as money follows Gross out the door.

If only all high school-style breakups were so interesting.