For Pimco, the abrupt shift in management comes at a critical time just as the decades-long bull run in bonds appears to be ending, and the bond market's biggest influence, the Federal Reserve, is maneuvering to dial back its extraordinary policies that pushed bond yields to historic lows.
Gross' Total Return fund had outflows of $42 billion, according to Lipper, and lost 1.92 percent last year. The fund underperformed 72 percent of comparable funds in 2013, data from Morningstar shows.
Burton Greenwald, an industry consultant who runs Greenwald Associates, said: "Bill Gross is well along in age and at some point he is going to want to hang up his hat. After all he wasn't fixed income manager of the year last year, Dan Ivascyn was. This is a critical transition period for the firm as stocks are more on most investors' minds."
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Because El-Erian managed only a fraction of the assets Gross oversees, his departure is unlikely to trigger the kind of redemptions asset manager TCW faced when star manager Jeffrey Gundlach left.
But it will raise questions, analysts said. Gross's calendar will likely be jam-packed with meetings for weeks as pension funds, endowments and others stream to Pimco's Newport Beach offices for an explanation of what is next.
In the meantime, deputy co-chief investment officers, Ivascyn and Balls, are considered rising stars, and highly capable. Ivascyn, 44, a mortgage credit expert, has just been named Morningstar's fixed income manager of 2013 along with colleague Alfred Murata. Their Pimco Income fund gained 4.8 percent with the help of bets on non agency mortgage-backed securities.
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Andrew Balls, a former journalist turned portfolio manager, has been Pimco's spokesman for the European debt crisis and has close ties in London where his brother, Edward Balls, is the Labour Party's shadow chancellor.
It will fall to them, in part, to help Pimco bring in fresh money and turn the tide after last year's outflows.
"Ivascyn has certainly demonstrated great skill as a portfolio manager,"
Michael Rosen, chief investment officer at Angeles Investment Advisors said, "but whether he can continue to do that while he's taking on increased responsibilities of being a deputy chief investment officer remains to be seen."