Investment giant PIMCO is quietly poaching executives from Blackstone and State Street as it plays catch up in a $5 trillion market

PIMCO

PIMCO has hired executives from State Street and Blackstone in an effort to expand its exchange-traded-funds business, Business Insider has learned.
Daniel Noonan started last month with a mandate to lead PIMCO’s ETF sales in its US wealth management division, while Avi Sharon joined the product strategy team in October as head of business strategy.
PIMCO is the largest manager of active ETFs, with a US business that’s expanded 18% annually for the last three years.

Bond giant PIMCO has hired two executives from rivals in recent months to boost a small but fast-growing business within exchange traded funds.

The Newport Beach, California-based investment manager added Avi Sharon from Blackstone in October and Daniel Noonan from State Street last month to help run its active ETF unit, moves not previously reported.

PIMCO is the 11th largest ETF manager with $26.5 billion in total assets, though it significantly lags BlackRock and Vanguard, who dominate the nearly $5 trillion ETF market.

However, the firm is the largest manager of active ETFs, overseeing $15 billion in its active US platform. That business is comprised of funds that have a manager or team choosing the investments within a fund, rather than following a specific index, such as the S&P 500. PIMCO’s 100-product mutual fund business still dwarfs the 15-fund ETF active platform, though that business has grown 18% annually over the last three years.

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And while active ETFs are still tiny compared with passive, index-based funds, PIMCO is betting the strategy will continue to pick up steam, as investors pivot to a lower-fee alternative to mutual funds.

"Our ETF footprint is small relative to our broader mutual fund business, but as we look down the road, we think we’re going to continue to see accelerated growth within our active ETF suite," Eric Mogelof, the firm’s head of global wealth management, told Business Insider.

PIMCO launched the first active ETF, but other managers are lining up to encroach on the firm’s dominance in fixed income. Last week, JPMorgan Asset Management rolled out an actively-managed bond ETF, and BlackRock’s iShares, the dominant ETF business worldwide, has two actively-managed bond ETFs.

PIMCO’s recent hires

Sharon, previously a principal in Blackstone’s private wealth management group, joined as executive vice president in product strategy. Sharon also spent more than five years at AllianceBernstein, where he was managing director of asset allocation and head of marketing.

At PIMCO, he’s taking over for the firm’s head of ETF product management, Don Suskind, who left in December after nearly 15 years, according to his LinkedIn. Sharon’s role includes responsibilities other than ETFs, a source said. Suskind did not respond to a request for comment.

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Noonan is leading ETF sales at the firm’s US wealth management platform and plans to hire several people in the coming months. He spent the last 13 years at State Street Global Advisors, most recently as director of wealth management sales, according to his LinkedIn profile.

The firm’s primary focus is a trio of fixed income ETFs, the largest of which, $11.7 billion MINT, is the biggest actively-traded ETF globally.

Across asset classes, PIMCO CEO Manny Roman has talked about growing quantitative investments. An ETF could be a good fit for the strategy, though there are no immediate plans to launch such a fund.

"There’s a growing segment of investors who prefer to use the ETF vehicle, and we at PIMCO want to be vehicle-agnostic," Mogelof said.

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Source: Business Insider