Pimco Staff Feared Farewell Party Clash Between Bill Gross and Mohamed El-Erian
Pimco Staff Feared Farewell Party Clash Between Bill Gross and Mohamed El-ErianReuters

The departure of Pimco's co-chief investment officer, Mohamed El-Erian, continues to reverberate after staff at the world's largest bond fund feared his farewell party would result in a clash with former business partner Bill Gross.

Some guests feared a tussle between two senior executives, and El-Erian had also voiced concern over the "awkward" atmosphere and how the party was "not a good idea", according to three sources cited by Reuters.

Some guests declined to go amid fear of a clash of the Pimco titans, the sources said.

El-Erian, who officially left Pimco on 16 March, decided it would be best to postpone his leaving party because of the tense situation.

Pimco's leader Gross is currently under fire for his $200m (£120m, €144m) annual remuneration as he continues to battle against investor concerns following the messy departure of his previous right-hand man.

The anger over his pay is further exacerbated by seeming sub-par performance of Pimco's flagship Total Return Fund, which Gross manages.

According to research firm Morningstar, the fund trailed roughly 70% of its peers.

In 2013, $41.1bn left the Total Return Fund and in February investors pulled out $1.6bn.

One of Pimco's trustees questioned Gross's huge pay package.

"You could hire 2,000 school teachers for that money," William Popejoy, a former financial executive who has been a trustee at the world's largest bond firm for 23 years, told the LA Times newspaper.

"I don't know what Bill [Gross] should be paid, but $200m is not appropriate."

The personal comments will come as a blow to Gross who is already battling to quell investor concerns after Mohammed El-Erian resigned from Pimco two months ago, without giving a reason.

Since then a war of words has ensued, and a raft of US investment firms have formally put Pimco on their "watch lists," following the public spat.

Gross allegedly told Reuters: "I'm so sick of Mohamed trying to undermine me."

When the news agency challenged Gross to produce the evidence, Gross reportedly said it was "on [El-Erian's] side".

"Great, he's got you, too, wrapped around his charming right finger," Gross said.

Since then, Pimco said Gross "did not make the statements Reuters attributes to him".

According to other media reports, the two men clashed at Pimco's office in Newport Beach, California.

"I have a 41-year track record of investing excellence – what do you have?" Gross asked El-Erian during one heated exchange, two witnesses told WSJ.

El-Erian replied that he was "tired of cleaning up your s**t".

Pimco, which is owned by the German insurer Allianz Group, manages $1.97tn in assets.

El-Erian stayed on with Allianz as a consultant.