Pimco Lands Former Fed Head Ben Bernanke as Adviser

By Kirsten Grind 

        After losing the Bond King, Pacific Investment Management Co. is calling on "Helicopter Ben" for help.
        The giant money manager said Wednesday that it has hired former Federal Reserve Chairman Ben Bernanke as a senior adviser. Pimco previously relied on Bill Gross for expertise on the economy and the Fed, but the manager of the world's largest bond fund left last September for rival Janus Capital Group Inc.
        Mr. Bernanke, who helped steer the U.S. economy through the 2008 financial crisis, will provide guidance on Pimco's investment process and Fed policy and sometimes meet with clients. It isn't publicly known how much he will be paid.
        Earlier this month, Mr. Bernanke also joined the Chicago-based hedge fund Citadel LLC as a senior adviser. His relationships with Pimco and Citadel will be his only two advisory relationships, according to a person familiar with his plans.
        A spokeswoman for Mr. Bernanke said the former Fed chairman, nicknamed Helicopter Ben for comments he made about fighting deflation with a helicopter money drop, was unavailable for comment. In a statement released by Pimco, Mr. Bernanke said he is "delighted to work together with Pimco's strong team of investment professionals."
        Mr. Bernanke is the latest in a string of high-profile government officials to make the shift into private business. Former U.S. Treasury Secretary Timothy Geithner, another key member of the team that wrestled with the financial crisis in 2008 and 2009, joined private-equity firm Warburg Pincus LLC as a president and managing director in 2013. Carlyle Group LP has enlisted many officials from the Bush and Clinton administrations in advisory roles.
        For Pimco, the Bernanke hire is an attempt to fill the void left by Mr. Gross's departure. As the firm's chief investment officer, Mr. Gross offered his advice internally at Pimco and publicly, through widely read monthly letters to investors and on financial television. While Pimco has replaced Mr. Gross with group Chief Investment Officer Daniel Ivascyn and a slate of other chief investment officers, none of them is as well known for their economic expertise as Mr. Gross.
        Since Mr. Gross's exit, Pimco has added other experts on the economy, including rehiring Nobel laureate economist Michael Spence last October as a consultant on macroeconomic and policy issues and Gene Sperling, a former White House adviser, earlier this year to consult on U.S. economic policy issues. Pimco appointed Joachim Fels, formerly Morgan Stanley's chief economist, to the role of global economic adviser in February as a full-time employee.
        Pimco has a history of bringing in big-name outside advisers. Former Fed Chairman Alan Greenspan, Mr. Bernanke's predecessor until 2006, also served as an adviser to the firm between 2007 and 2011.
        Pimco executives said the firm began working with Mr. Bernanke in late 2014 after he left the Fed. Mr. Bernanke has contributed to the firm's periodic investment forums and is scheduled to participate in a Pimco forum in May, when hundreds of the firm's executives gather to create a forecast for the global economy.
        "We've been building a relationship with him since last year," Pimco Chief Executive Douglas Hodge said in an interview.
        Following his departure from the Fed, Mr. Bernanke was offered "many, many opportunities," at other money managers and financial firms, said a person familiar with the offers. But Mr. Bernanke didn't want to work at a firm regulated by the Fed, and was impressed with Pimco because he found the business fascinating and thought he could offer useful advice, this person said.
        Pimco executives initially reached out to Mr. Bernanke and he met in person with Messrs. Hodge and Ivascyn and President Jay Jacobs starting late last year, according to people familiar with the meetings.
        Mr. Bernanke will advise Pimco during a time of tumult at the Newport Beach, Calif.-based firm, which continues to suffer from investor outflows following the departure of Mr. Gross. More than $20 billion in assets have left Pimco's flagship Total Return Fund in the first three months of this year. Pimco, with $1.6 trillion in assets under management, is a unit of German insurer Allianz SE.
        Because Mr. Bernanke is a "very high-profile hire," it likely will help attract client attention, said Sarah Bush, an analyst at fund-research firm Morningstar Inc.
        It also helps Pimco fill a hole in economic-policy thinking left by Mr. Gross and others. Paul McCulley, who returned to Pimco last May at the urging of Mr. Gross, left his role as chief economist in February.
        "They're certainly looking to make sure they have the depth there on the macroeconomic side," Ms. Bush said.
        Pimco executives declined to say how much Mr. Bernanke would be paid or other details of his contract with the firm.
        "He'll be a resource for us in terms of formulating investment strategy, " Mr. Ivascyn said.
        Pimco has worked with the Fed before: During the financial crisis, it was tapped by the Fed to manage the commercial-paper assets as part of a program designed to fund purchases of commercial paper.
        Pimco also was hired by the Fed, along with other money managers, to buy agency mortgage-backed securities as part of an initiative to spur economic growth during the financial crisis. Mr. Bernanke had no role in choosing Pimco for any relationship with the Fed, according to a person familiar with his relationships. A Pimco spokesman said the firm was hired for both roles by the New York branch of the Fed.
        Mr. Bernanke will continue his work at the Brookings Institution, where he is a distinguished fellow in residence. His book, "The Courage to Act: A Memoir of a Crisis and Its Aftermath," is due out in October.
        Write to Kirsten Grind at kirsten.grind@wsj.com
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        (END) Dow Jones Newswires

        April 29, 2015 18:51 ET (22:51 GMT)

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