The sources close to Pimco said many clients see the firm as the target of a "media feeding frenzy." Pimco has been telling them the hyperbole does not describe the actual situation between Gross and El-Erian, the sources said.
Some big investors say that Pimco's message is persuasive.
David Hunter, chief investment officer of North Dakota's Retirement and Investment Office, said Pimco made contact with his fund shortly after the news of El-Erian's departure came out. Since then there have been several other conversations, with the frequency of contact being more than the typical monthly or quarterly calls. It has about $400 million invested with Pimco.
"They've been very proactive in getting the message out," Hunter said. "They were very professional, very diligent."
Even so, the North Dakota board and several other state and local pension funds have also put Pimco on their "watch lists," a signal that they will keep a much closer eye on its performance than usual. It could eventually lead to reductions in the amount of money they allocate to funds at the firm.
In recent days, Gross has become more contemplative, according to Jacobson, who met him again on March 10.
"Gross clearly views a lot of the things he has said with some regret, and takes responsibility for having said things that have added to the drama rather than calmed the situation," Jacobson said.
Gross also said he would like Pimco's culture to be more where his managers can work through issues internally, without feeling like they have to pull their punches out of the fear of crossing him, Jacobson added.
Several former employees described the firm as an unforgiving, cut-throat place to work at, where people are regularly humiliated for stumbles, fired for mistakes, and where Gross' bad temper has to be put up with.
One former employee, for example, recalled nights he was so scared of being fired for mistakes that he could not sleep. Another said if someone showed up to an investment committee meeting unprepared or just didn't sound coherent and concise, they were unlikely to be asked back.
According to one of the sources, over the past few weeks Gross has met more than two dozen senior portfolio managers individually for half an hour each, and asked them how they were doing and what was on their mind.
Such meetings with Gross are unusual. Several former employees said he usually speaks to only a few people at the firm and prefers to communicate by email.
Jacobson said Gross now seemed anxious to make it easier for managers to get their ideas heard "without feeling as though they're walking on egg shells."
Focus on alpha
Referring to the new investment committee, Jacobson said, "According to Gross, those folks very clearly feel more comfortable speaking their minds and sharing their ideas than was the case during earlier iterations of the committee."
Pimco's previous structure concentrated nearly all investment strategy decision-making onto the shoulders of Gross and El-Erian.
However, some former employees said they were skeptical that after the dust has settled much will change at Pimco.
Some investors may not even want change. The aggressive culture has yielded high returns: for more than 15 years, Pimco's Total Return Fund posted one of the best results of any bond fund.
Investment consultant NEPC said in a report based on meetings with Pimco officials on February 25 that the plan to restructure the investment committee had been developed by El-Erian more than 12 months ago and was simply accelerated after he resigned.
NEPC came away from the meetings with the sense that the deputy CIOs would perpetuate the investment culture at Pimco, which it said "can be characterized as an intense and competitive environment that has been developed over many decades."
"This extreme focus on alpha and competition is embraced at Pimco and in many ways differentiates the firm from its competitors," NEPC wrote in a report for its client, the City of Fresno Retirement Systems.
It recommended that the Fresno systems place money with Pimco.