While investors pulled over $100 billion from the enormous Pimco bond fund that Mr. Gross used to run, those outflows have slowed and the fund's returns have been relatively good.
Mr. Gross, by contrast, has attracted only around $1 billion to a new bond fond he created at the Janus Capital Group, the southern California company he joined immediately after leaving Pimco.
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The new Janus fund has significantly underperformed both its benchmark and the Pimco fund Mr. Gross used to lead, data from Morningstar shows. While Janus's stock rose more than 60 percent in the months after Mr. Gross joined the company, it has since given back over half of those gains.
Even before he left Pimco, Mr. Gross's results were lagging partly as a result of bad calls on the timing of when the Federal Reserve would end its huge stimulus programs and begin raising interesting rates. The uneven returns led investors to pull money from the fund.
The lawsuit locates the beginning of the problems in Mr. Gross's decision to bring Mr. El-Erian to Pimco in 2007 to groom him as a potential successor. Mr. El-Erian was at Pimco previously, but in 2007 he was running Harvard University's endowment.
When Mr. El-Erian returned, the suit says, he was eager to push Pimco beyond the bond funds that had traditionally been its strength and wanted to use "a host of high-risk derivative asset classes" he had learned about at Harvard. The suit says the returns on the funds that Mr. El-Erian ran at Pimco were "abysmal."
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According to the suit, Mr. Gross offered to step back from everything but his bond funds, but this scared Mr. El-Erian and led him to "abruptly" announce his resignation in early 2014.
At the time, Mr. El-Erian said he was stepping back to write another book and spend more time with his family.
Almost immediately after Mr. El-Erian's departure, leaks to the news media attributed the blame for his departure to Mr. Gross.
An internal Pimco investigation determined that the leaks had come from Andrew Balls, a fast-rising star at Pimco who previously worked as a journalist at The Financial Times, the suit says. When Mr. Balls was confronted, the suit says, Mr. Balls initially denied that he was responsible but then, when shown the evidence, changed his story.
According to the suit, Mr. Gross pushed for Mr. Balls to be fired, but instead Pimco executives had him sign a document suggesting that he had only given out general information about Pimco and agreed that Mr. Balls would remain at Pimco. Mr. Balls is now one of five co-chief investment officers under Mr. Ivascyn.
Mr. Gross, the suit says, was eventually forced from the firm after Mr. Ivascyn and a few others threatened to resign if Mr. Gross was not forced to leave.
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Ultimately, Mr. Gross was given an offer to leave the firm but in a way that would "conceal the news from investors, the press, and the market generally."
"Mr. Gross could not agree to participate in this deceit on investors and the public by accepting this so-called offer of his effective termination," the suit says. "As a result, he was forced out of the company he had founded and led for over 40 years."
Mr. Gross's lawsuit, filed in a state court in Orange County, asks for a jury trial, for his lawyers fees and for damages.